Week 1 Reading Assignment by pengtt

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									                                       Table of Contents
Week 1 Reading Assignment                                                     5
      Why Budgets Don‘t Work (and how to fix them)                            6
      How to Create a Zero-Based Budget                                      11
      Beating Debt and Building Wealth                                       16
      The Truth about Money and Relationships                                19
      Budgeting – When Only One Wants to Change                              21
      How to Put an End to Money Arguments                                   22
      Questions About Marriage and Money Management                          23
Week 2 Reading Assignment                                                    25
      Finding Extra Money for Your Accelerator Margin                        27
      Stuffitis                                                              30
      The Debt Snowball                                                      31
      The High Cost of Using Credit Cards                                    32
      Bankruptcy Signs                                                       33
      Teaching your Teen Financial Responsibility                            34
      A Plan for Beau and Tiffany                                            36
      Five Cheap Date Ideas for Valentine‘s Day                              41
      Thoughts on Vacations                                                  42
Week 3 Reading Assignment                                                    43
      No credit score, no mortgage?                                          44
      Your Credit Report;                                                    45
      Your Credit Score;                                                     47
      Identity Theft;                                                        49
      Debt Collection;                                                       53
      New Credit Card Rules                                                  58
      North Carolina Consumers Have the Right to Obtain a Security Freeze    59
      Keeping Intensity During Step 3                                        61
      Some Questions and Answers                                             62
      The Great Credit Rebellion                                             63
Week 4 Reading Assignment                                                    65
      How do I Make a Lowball Offer?                                         66
      What Kinds of Insurance do I Need?                                     67
      The Truth About Life Insurance                                         71
      Protecting Your Financial Freedom                                      72
      Controlling Impulsive and Compulsive Spending                          75
      Term Life Insurance: Where the Value Is                                77
      Guaranteed or Extended Replacement Cost                                78
      Avoid Single-issue Insurance Policies                                  79
      Why You should Have Disability Inssurance                              81
Week 5 Reading Assignment                                                    83
      The Power of Compounding                                               84
      Dave Ramsey‘s Investment Philosophy                                    85
      The Wisdom of Great Investors                                          91
      Qualified and Non-Qualified Retirement Plans                          100
      Your Retirement Savings Options                                       102
      Traditional vs Roth IRA                                               103
      College Funding                                                       106

      Student Loan Backlash                                                     109
      The Decade in Review                                                      111
      Money Market vs. Certificate of Deposit                                   113
      Viaticals: Watch Out!                                                     114
      How to Set Investment Goals                                               116
      Social Insecurity: Don‘t Rely on the Government                           117
      Things You Should and Shouldn‘t Do Once You Retire                        118
      Three Steps to Wealth Building for Young Adults                           119
      Important Update from Dave Ramsey About the Economy                       120
      Plan Now for Your Golden Years                                            122
      Three Retirement Tips for Late Beginners                                  123
      Roth IRA 101                                                              124
      How to Survive the roller Coaster Economy                                 125
      Proper Investing                                                          126
      The Stock Market Will Rebound                                             127
      Retirement Planning: Yourself or a Professional?                          128
      Three Mistakes That Can Sabotage Your Retirement                          129
      Thoughts on Investing                                                     130
      Millionaire Secrets                                                       131
      Alleviate the Risk of Investing                                           132
      Keep at It and Cash In                                                    133
Week 6 Reading Assignment                                                       135
      What to Do if You Lose Your Job                                           136
      DISC Personality Profile                                                  138
      Job Hunting Tips                                                          142
      Dress for Success                                                         144
      Job Networking Tips                                                       145
      Letter of Introduction                                                    148
      Resume Cover Letter                                                       149
      Resume Tips                                                               152
      Thank You Letter and Follow-up Letter                                     157
      References                                                                159
      Excerpts Taken From Our Work and Our Calling                              161
      Home Mortgages                                                            162
      Cancellation of Private Mortgage Insurance                                164
      So You Want to Start a Small Business                                     165
      Home Equity Line of Credit and Home Equity Loans (Second Mortgages)       166
      Dave Ramsey Answers Questions About Mortgages                             169
      Looking the the Best Mortgage                                             170
      Mortgage Shopping Worksheet                                               174
Week 7 Reading Assignment                                                       177
      Some New Testament Guidelines for Christian Giving When You are in Debt   178
      The Great Misunderstanding                                                184

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Week 1 Reading Assignment
          Why Budgets Don’t Work

     How to Create a Zero-Based Budget

      Beating Debt and Building Wealth

  The Truth About Money and Relationships

 Budgeting – When Only One Wants to Change

   How to Put an end to Money Arguments

Questions About Money and Money Management

                                        Why Budgets Don’t Work
                                               (and how to fix them)
From: http://www.gettingfinancesdone.com/blog/archives/2006/08/3-reasons-most-budgets-dont-work-and-how-to-fix-them-

Let‘s face it, budgeting can be a pain. Most people get too discouraged trying to get a budget to work.
They spend hours trying to figure out how much to budget in each category and may even track every
penny spent during the month only to find out that reality didn‘t match what was budgeted. In these
instances budgeting just seems like a futile theoretical exercise. There‘s no follow up or reconciliation to
tie one month‘s budget to the next. Add to this the emotional issues that budgeting can trigger and your
chances of maintaining a budget dive bomb. Many people who get to this point just give up and quit.

Why most budgets don’t work

There are three major problems with a common budget:

    1. They don‘t reflect reality.
    2. They don‘t connect from one month to the next.
    3. They don‘t track the surplus money left over after all the categories are filled.

1. Most budgets don’t reflect reality

Budgeting is an exercise in being wrong. Every time you sit down and write out all your categories and
how much you think you‘re going to spend, you‘ll be wrong. Being wrong month after month quickly can
get discouraging and many people give up. What‘s the point in trying to predict how much you‘ll spend
each month if you know you‘ll be wrong.

So you overspent. Ok, at least you know you overspent and that could be helpful in planning next month
but where did that overspent money come from? How are you going to reconcile the difference?
Unfortunately there‘s no way around being wrong. There‘s really no solution besides developing
obsessive tendencies and even then…good luck. You must first accept that you‘ll be wrong…every
month. My wife and I have never been right even though we‘ve had an established budget for years.
Accept it.

Now I‘m NOT saying you won‘t start getting really close. In fact, in many categories you will be right.
But so far I‘ve never been 100% right. Don‘t get discouraged if you‘re just starting out because for the
first few months you‘ll be REALLY wrong. It took us about 3-4 months until we started getting into our
budget groove.

One way to get your budget closer to reality is to allocate every dollar of your income. If you have money
left over after addressing your needs, allocate it. I don‘t care where; put it in a ―fun‖ category or direct it
towards meeting a financial goal. Don‘t just say, ―Oh, I have leftover money. I must be doing really good
at budgeting.‖ If you don‘t allocate everything you will end up wasting that which is left over and your
budget will be broken from month to month.

Another way to close the reality gap is to be realistic about what your needs are. Things like shelter,
clothing, and food are not optional. Many people have unrealistic expectations about what they will spend
on these categories. I‘m certainly an advocate of being thrifty and looking for good deals but you can only

take it so far. If you refuse to face how much you really need to spend in these categories to survive
without eating ramen every night, your budget will not be an effective tool.
Yet another way of helping your budget reflect reality is to make sure you have a way of dealing with the
difference between your budget and actual spending. And that leads us into our second problem.

2. Most budgets don’t connect one month to the next

Quicken is a great example of why this problem exists. Quicken‘s budgeting feature seems great. It allows
you to easily enter budget amounts and will even pre-populate projected amounts for you. At the end of
the month you can run a nice neat report telling you how much you over or under-spent. There‘s just one
problem. There are no tools for helping you deal with the difference (if there are, please let me know
about them). You just enter in the next month‘s budget amounts using the exact same process and
projections as the month before. This makes for a nice, neat, pretty budget sheet but not a very useful one.

Many people think a budget is a static document. You fill out one template reflecting all your categories
and how much you should spend each month and use the exact same sheet from month to month. That‘s
not a budget. It‘s a dead document. A real budget is a living document or series of documents. It changes
from month to month and should be a reflection of reality, not a theoretical exercise.

The fact is, your expenses change from month to month. Car registrations sneak up on you. Unexpected
birthdays pop up. Unexpected expenses happen. And you can‘t always just take your yearly expenses and
divide by 12. If your car registration is coming up in 3 months and you haven‘t saved anything for it,
dividing by 12 will only leave you with a quarter of what you need to pay it. The unique expenses for
every month need to be dealt with individually, not just from a nice clean Quicken projection.

For a budget to work, you must link one month‘s budget to the next.

Is there too much money left over? Great. Where does it go? Should we pay off debt, save for retirement,
save for a vacation, or just blow it and buy that new toy? I‘m not against throwing caution to the wind as
long as it‘s done consciously and not by default.

Is there too little money to cover all our spending? Where did it come from? Will we be spending less on
groceries, lowering our savings contribution, or going into more debt?

3. Most budgets don’t track the surplus money left over after all the categories are filled

For a budget to work, you must allocate ALL of your income to categories. As Dave Ramsey puts it, you
must ―spend your whole month on paper‖ before you spend it in real life. Other analogies that come to
mind are Stephen Covey‘s concept of the spiritual creation before the physical creation and David Allen‘s
idea of writing down EVERYTHING that is on your mind so you can get it out of your head and on

Stephen Covey Comparison

Let‘s look at the Covey analogy. Covey says that you should ―begin with the end in mind.‖ One way of
doing so is to create what you‘re trying to achieve spiritually first, and then physically. A builder doesn‘t
build without a blue print. You should have a good idea of where you want to go either on paper or in
your mind before you set out. Doing so makes your efforts more effective.

When it comes to finances, by writing ALL YOUR PLANNED SPENDING down on paper first (spiritual
creation), your chances of actually following your plan significantly increase (physical creation). You‘ll
also be much more likely to achieve your larger financial goals (physical creation).

David Allen GTD Comparison

Now let‘s consider David Allen‘s idea of capturing everything on paper. He teaches that you should get
anything and everything down on paper that occupies your mind. Doing so frees up ―mental RAM‖ and
allows you to spend your time more effectively rather than eating up endless mental cycles on the same
issues, questions, and to-dos.

Similarly, by writing down how you are going to spend every dollar, you free yourself from mental worry
and guilt and allow yourself to think about much more enjoyable things. Combine this with using cash for
those categories that tend to be out of control and you can literally eliminate financial worry and anxiety.
Every dollar you spend will be focused and controlled with very little effort.

No matter how you want to look at it, you need to allocate EVERY SINGLE DOLLAR ON PAPER for a
budget to be of maximum effect. Why? Doing so forces you to really think about where you want your
money to go and insures you use each dollar to it‘s fullest. You‘ll probably notice that when you don‘t
allocate every dollar, your left over dollars usually end up spending themselves. You end up with nothing
to show for it, not even the conscious realization that you had fun wasting that money.

Spend frivolously and feel good about it

By saying that you need to allocate every single dollar, I‘m not saying you can‘t have fun with your
money or spend frivolously. Go ahead and consciously decide to have fun or even waste the leftover
money. Allocate it as ―fun‖ money to be spent however you want, whenever you want. By doing so you
may enjoy spending that money even more. You‘ll be able to do so with confidence and no guilt that you
should be spending it elsewhere.

Decide before you’re in the heat of the moment

Like using cash, allocating all your funds allows you to make more conscious decisions about where your
money should go. Instead of waiting until you‘re standing at the register, you can decide where your
money will go while your looking at the big picture. Your decisions will be more rational and less
emotional. You will also be able to direct your money towards meeting your larger, longer-term goals.
Instead of piddling money away, save for that new car or piece of furniture. Or for real financial peace,
pay off debt.

Harness the power of focus

Allocating every dollar allows you to harness the power of focus. Take your plumbing, for example.
Water by itself isn‘t very useful in a puddle or lake. But give water the constraints and focus of a pipe and
all of a sudden it can be used for your toilet or sink. Focus water through a hose and you can water your
lawn or put out a fire. The constraint actually makes the water more powerful and useful. Similarly
constraining your money by allocating every dollar makes your money more useful and powerful. Your
ability to save and reach your goals will be increased.

See if you can identify with this personal example. Before we got our financial acts together, every time
we received a bonus, raise, gift, or other unexpected income the money would just seem to slip through
the cracks. Most people tend to expand their lifestyle to meet their income. In contrast, imagine if you
were able to focus and direct every extra dollar. Every time you got a bonus, heck, every time you saved
$5 on your phone bill, you would be able to easily redirect that money to another purpose. Your power
and ability to aggressively meet your financial goals would increase dramatically. Without an effective
budget, what is the point of trying to save a few dollars when they disappear anyway? But with an
effective budget every dollar counts and is directed exactly where you want it.

Another benefit of allocating every dollar is that your budget will reflect reality more closely. If you have
money left over after allocating your needs, that extra money almost always WILL be spent one way or
another. If your budget doesn‘t reflect that, it doesn‘t reflect reality enough to be effective. To eliminate
financial stress and a sense of being out of control once and for all you MUST KNOW where your money
is being spent. You must TELL IT WHERE TO GO rather than letting it decide.

Using a Zero-Based Budget

A critical tool to help solve these basic budget blunders is the zero-based budget. Now if you‘re expecting
something flashy, you‘ll be disappointed. A zero-based budget simply means that you allocate every
dollar of your income so that your income minus your expenses equals ―zero.‖ It‘s as simple as that. No
special forms or fancy software are necessary. Using a zero-based budget forces you to allocate every
dollar and will help your budget more closely reflect reality.

Always track and DEAL WITH the difference between “budgeted” and “actual”

Make sure you follow up at the end of every month and write down what the difference is in each
category between what you budgeted and what you actually spent. You then need to deal with that
difference. Don‘t just look at it and say, ―Oh, there‘s a difference. Good to know.‖ You must either
reallocate the money on paper or carry the difference over to your next month‘s budget.
For example, if you spent $5 more on your phone bill than you thought (a common occurrence since the
phone bill tends to be quite variable), you must spend $5 less in another category. One option is to see if
you spent $5 less than you thought in another category that month. If so, simply adjust your allocations on
paper. If there is no unspent money in your categories then you need to carry that $5 over to the next
month and allocate $5 less in a category for your next month‘s budget.

Implement a “grease” category

To deal with small instances of overspending, I always budget a ―grease‖ (a.k.a. ―blow,‖ ―cushion,‖
―Reality Bites‖) category of about $100 that gives me a cushion in dealing with such instances. Since you
know you‘re going to be wrong (see above) you might as well plan for it. This account acts like the
―grease‖ that keeps the financial gears turning. It picks up my slack. And if I have extra ―grease‖ money
left over at the end of the month, it directly gets reallocated for something else the next month (often
something fun as a little reward).

Putting it all together

I realize that I‘ve skipped over many specifics. Implementing some of these concepts may seem a bit
confusing at first. If so, no worries. I‘ll be addressing specifics in future posts. For now, let me summarize
the steps you can take today:

   1. Implement a zero-based budget.

2. Allocate every dollar of income to a category. When you subtract your budgeted expenses from
   your income, it should equal $0.
3. Be sure to budget a ―Blow‖ category to deal with minor inaccuracies.
4. Be realistic about how much you are going to spend on necessities. Most people under-allocate in
   the categories of food, clothing, and transportation.
5. Know that your spending won‘t exactly match what you budgeted. If you are just starting, you
   may be WAY off. That‘s ok. Do a little, learn a lot. It WILL get better. If you‘re married, be easy
   on your spouse.
6. Calculate the difference between ―budgeted‖ and ―actual‖ spending and either adjust the current
   month‘s allocations or deal with the difference in next month‘s budget. I realize there are some
   BIG procedural holes and questions here that I‘m skimming over for now. Stay tuned.

                                 How to Create a Zero-Based Budget

          From: http://www.gettingfinancesdone.com/blog/archives/2006/08/how-to-create-a-zero-based-budget/

One of the ways to make your budget work is to create a zero-based budget. Today‘s post outlines how to
create your first zero-based budget. Over the next few weeks I‘ll be addressing various aspects of creating
and managing a budget. Let‘s start with the basics. Some of these steps may seem obvious or simplistic.
But for those who just can‘t seem to get a budget started, I hope to give you some step-by-step detail that
will help make creating a budget easier.

What is a zero-based budget?

A zero-based budget is one where your total income minus your total expenses equals $0. In other words,
it forces you to assign every dollar of income to an expense (or savings) category. As Dave Ramsey puts
it, you‘ll be ―spending your month‘s income on paper‖ before you spend it in real life.

Benefits of a zero-based budget

Using a zero-based budget and properly dealing with the difference from month to month will allow you
to gain total control over every dollar you spend. If you get a bonus or spend less than you planned during
the month, you can easily redirect that money where you really want it instead of letting it dissipate
through unfocused spending.

A word about spreadsheets

I highly recommend using a spreadsheet to do your initial budget because it‘s very easy to calculate
amounts and rearrange the order of items. If you don‘t have Excel, you can download the free Open
Office CALC spreadsheet software or use a free online spreadsheet like Google Spreadsheets or
NumSum.com. Simply using paper and pen is ok too. If you do, you may need to re-write it a couple of
times and be sure to double check your calculations.
When first starting your budget I would NOT use the budgeting tools in Quicken, MS Money or other
automated tools. You may be able to use those tools effectively once you have a solid hold on your
budget, but for now it‘s best to make your budget by yourself so you know every nook and cranny. That
way you‘ll be less likely to make errors due to not understanding how an automated tool is built. You will
also be more likely to use a budget if you create it yourself. Once you have a high degree of confidence
that your budget is working properly, feel free to experiment with pre-built tools and spreadsheets like

Preparation: Get out those statements

Before you get into the thick of things, you‘ll want to do a little preparation by collecting the following:

      Pay stubs
      Records for other income such as bonuses, gifts, and tax returns
      Copies of your recurring bills
      If you track expenses in Quicken or MS Money, print out monthly reports of your expenses for the
       last few months
      If you use checks regularly, it may be useful to have your check register on hand

Agree to be civil

Now take a few deep breaths. If you are doing this with a spouse, agree to be civil. Ask yourself ―how can
I do this and enjoy it?‖ As you go through the initial steps of allocating, don‘t nit-pick too much. If one
person wants to budget funds for a category and the other disagrees, let them budget the funds and you
can go back later and adjust once you know if you‘re over and by how much.
If things tend to get heated, I also recommend setting a time limit for your budgeting. My wife and I tend
to do well in chunks of about 30 minutes. Once we go over that, I start to get grouchy. It‘s ok to do this a
little at a time. If you schedule 30 minutes a night for several days, you should be able to get through

Step #1: Write down all your sources of income for the month

Let‘s get started. If you have a fixed paycheck once or twice a month, this step will be easy. Just write
down how much you make every month. If your finances are really tight, you should do a budget for each
paycheck to ensure you have the funds on hand to pay bills that occur in that time period.
If you are self employed or have an irregular source of income, you‘ll want to wait until you get an actual
check and then follow this process for just that check. In the meantime, you can follow this process for the
money you have available in your bank account. Just use your balance as the income. For example, if
your bank account balance is currently $3,000 then put that amount as your income. As we go through
this process you‘ll be allocating how you‘ll use that $3,000 until your next paycheck.

Do I put down net or gross income?

It really doesn‘t matter if you put down net or gross. If you use gross (the amount before taxes, insurance,
etc that are automatically deducted from your paycheck) you need to be sure to include the categories and
amounts that are automatically deducted from your paycheck in your budget. I prefer using net so that I
don‘t need to write the extra expenses down every month. Because taxes and insurance are the same from
month to month I prefer to simply check the amounts every quarter or so to make sure everything is still
the same. It‘s more efficient to track them separately.
Of course, if you‘re self employed, be sure to allocate for paying taxes.

Step #2: Write down a list of expenses

Write down a list of all the expenses you expect to have this month. I‘ve included a list of possible
expenses below to prompt your memory. Be sure to include expenses unique to only this month. Do you
have a friend or family birthday? Is your registration due? This step may actually unearth some expenses
that you forgot about. If you think of expenses that are coming up but not in this month, that‘s ok, just go
ahead and write them down and we‘ll deal with them a little later.

      Income
           o Paycheck 1
           o Paycheck 2
           o Other Income 1
           o Other Income 2
      Expenses
          o Taxes (if using gross income or you are self employed)
          o Mortgage Payment
          o Second Mortgage payment
          o Household (yard)
            o   Utilities: Gas
            o   Utilities: Elect/Water/ Gar
            o   Auto: Gas
            o   Auto: Insurance
            o   Auto: Maintenance
            o   Auto: Registration
            o   Satellite TV
            o   Life Insurance
            o   Debt reduction
            o   Babysitting
            o   Clothing
            o   Grocery
            o   Grocery: Eat Out
            o   Grocery: Eat Out
            o   Grocery: Nonfood
            o   Medical
            o   Hair cut/personal care items
            o   Charitable Donations
            o   Emergency Fund
            o   New car savings
            o   College Fund
            o   Dry Cleaning
            o   Gifts: Birthdays
            o   Gifts: Christmas
            o   Gifts: Holidays and Other
            o   Household: Maintenance
            o   Retirement Savings
            o   Magazine Subscriptions
            o   Entertainment: Dates
            o   Entertainment: Video rentals
            o   Personal money (1 for each individual)
            o   Cushion

You‘ll probably miss an expense or two at first and find yourself part way through the month saying
―shoot, I forgot to budget for that.‖ To address this scenario, be sure to budget a ―cushion‖ account (last
week I called it a ―grease‖ account, but I think cushion is simply more understandable and descriptive, so
I‘ll stick to that). I recommend starting at about $100 at first. Over time, you‘ll be able to get a feel if this
is too much or not enough.

Include savings and debt reduction in expenses

When I say ―expenses,‖ I really mean ―funds that will be spent or allocated to other purposes.‖ Saying
―expenses‖ is just so much easier. Include any savings allocations, debt reduction payments, or any other
monetary outflows in your expense list.

Step #3: Identify your expense types

For this step, simply go through all the expense categories and mark if they are fixed, semi-fixed, or
variable. Just write an ―f,‖"s-f,‖ or ―v‖ next to the category (or in another column if using a spreadsheet).
Fixed expenses are those that don‘t change from month to month like your cable bill. Semi-fixed expenses
are those that may vary slightly from month to month like a phone bill. As a rule of thumb, semi-fixed
expenses shouldn‘t vary more than $10 in a month. Variable expenses are those that vary from month to
month more than $10 like groceries or gas expenses.

Step #4: Allocate your fixed and semi-fixed expenses first

The reason we marked each expense type was to determine the order to allocate them in. First allocate
your fixed and semi-fixed expenses. I recommend doing this simply because it‘s easy. Your fixed
expenses will probably include your largest expenses, such as your mortgage, so it will be easier to deal
with the smaller amount left over. Plus, most of your fixed expenses are probably not very negotiable
without dramatic lifestyle changes or disruptions so they give you a sort of ―hard landscape‖ around
which you will fill in the variable expenses.
Once we are done allocating all our expenses, we‘ll circle back and see if we want to eliminate one or
more of the fixed expenses. For now though, allocate them all.

Average out your semi-fixed expenses

For your semi-fixed expenses you‘ll have to average out how much you‘ve spent over the last 3-4 months.
No need to get too crazy or precise as long as your in the ball park. You‘ll be wrong anyway.

How to deal with periodic expenses

There will be many expenses that won‘t occur this month but that you will need to save for like car
registrations, birthday and Christmas gifts, and some insurance payments. To ensure you have enough
money when the time comes you need to start saving that money now.

Most people just divide these expenses by 12 and save that amount each month. DON’T TAKE THIS
APPROACH WHEN STARTING A BUDGET. You will end up short unless that expense is a full
year away. Instead you need to take each expense, count how many months away it is, and divide
the total payment amount by the number of months. For example, if I have a car registration payment
of $100 due in four months, I will divide $100 by 4. That means I should budget $25 a month to save
towards the registration. As soon as I pay the registration, I can then divide the next registration payment
by 12 and save little by little for next year.

This approach may cause a little strain on your budget at first because you will need to be saving a larger
amount each month for the expenses coming up in the short-term. However, once you make the payment,
your monthly allocation will go down for that category freeing up extra cash that you can redirect
wherever you want.

There is one other approach I should mention. My wife and I find that we will fairly consistently receive
―windfall‖ money two or three times a year in the form of bonuses, gifts, or tax returns. Occasionally we
will budget portions of the windfall to periodic expenses so we don‘t have to worry about saving from
month to month. The only problem with this approach is that if you don‘t have enough windfalls, you
could end up having a periodic expense and not enough money to pay it.

Step #5: Allocate your variable expenses.

Now that you‘ve gotten a good chunk of your income out of the way, it‘s time to deal with what‘s left
(hopefully it isn‘t depressingly little). So far we haven‘t worried about calculating income minus
expenses. If you want to, you can do a quick calculation at this point so you know how much left over
you‘re dealing with. Or you can just speed through and budget your variable expenses and do a mass
calculation at the end.

Try not to scrimp too much on your necessity categories like food, clothing, and transportation/gas. Most
people underestimate these categories.

Personal money

I highly recommend allocating personal money for each spouse. Having your own money to spend
however you want is crucial to making a budget work. Even if you can only afford to budget $10 or $20
dollars, it will help your budget feel more manageable.

Step #6: Calculate the difference between income and expenses.

Ahhh, the moment of truth. Subtract your total expenses from your total income. This is where a
spreadsheet comes in handy. You might want to be sitting down when you do this.

Step #7: Adjust your categories until income = expenses

Now comes the hard part. You need to adjust your categories until your income equals your expenses.
This is where you will need to make some trade-offs between one category and another. This step is
usually where the most conflict occurs between couples because it exposes their conflicting values. If
things get too heated, it‘s probably better to take a break and continue later. Just remember that this is
your first budget and you will refine things as you go. You don‘t have to feel locked in to the decisions
you make now.

What to do with a positive difference

If you‘re in this situation, congratulations! Now you just have to allocate the remaining money. The
whole point of a zero-based budget is that you need to ALLOCATE EVERYTHING. That way the
remainder won‘t just disappear through unconscious spending. The good news is you can allocate it any
way you want. If you are going to allocate it as money to blow, that‘s fine as long as you consciously do
so. Some other suggestions for allocating this money include:

      Pay down debt
      Save for retirement or your children‘s college
      Save for larger purchases like vehicles or furniture
      Save for a vacation

What to do with a negative difference

I‘m guessing that the vast majority of people will have allocated more expenses than they have income
resulting in a negative difference. Don‘t be discouraged! The first time we did this, reality hit us hard. We
had to do a major evaluation of our priorities and really distinguish between our wants and needs.
For many families this process will expose that they have been spending more than they make and can‘t
support their current lifestyle on existing income. It can be extremely hard to realize that lifestyle changes
are in order, but at least you now know the truth and can fix your problem instead of going into more

Here are some suggestions for adjusting your budget:

   1. Identify all your non-necessities. Yes, cable is a non-necessity.
   2. Each spouse should rank the non-necessities in terms of importance to them
   3. Eliminate or reduce those that both spouses agree are a low priority

Hopefully by eliminating or lowering the easier ―consensus‖ items you will now be at a zero balance. If
not, you will have to negotiate which categories are most important to each of you. You may have to
make a lifestyle change by either earning more income or lowering your cost of living. In some cases,
moving to a less expensive place may be in order. Housing is usually the largest expense and can make
the biggest difference to your expenses. Not long ago, my wife and I almost had to move in order to live
within our means because we had a bad year with some unexpected medical expenses. That is what
prompted us to really take control of our finances. If we hadn‘t got on a budget, we would have had to
move to a less expensive home.

Step #8: Print out your final budget

I strongly recommend you print out your final budget and put it in a binder. This gives you a hard-copy
record of your decisions. The problem with keeping only an electronic version is that you sometimes can‘t
be sure if it‘s been changed from the original. Printing a copy allows you to put a stake in the ground for
your decisions up to that point. It will also be useful when reconciling at the end of the month and
planning next month‘s budget.

Next steps

Congratulations! You‘ve now completed your first zero-based budget. Now that you have a budget in
place you will need to execute your plan and follow up at the end of the month to deal with what you
actually spent. Over the next few weeks, I will be covering some ways to make tracking your spending
and reconciling your budget much easier. The first month you use a budget, review it as often as you need
to stay on track. Take a few moments each day to review your spending if necessary. I recommend
reviewing your progress at least each week at first. Once you get your budget down, and with a few tips
and tricks, you‘ll be able to stay on track with a single monthly review.

                                 Beating Debt and Building Wealth
If you're going to beat debt and build wealth, you've got to do it in the right order. You can't effectively
invest for college and retirement until you eliminate the debts that are draining your greatest wealth-
building tool: your income.

In Step #1, you have to focus your efforts toward getting $1,000 in your emergency fund. Then, in Step
#2, you have to put every last dime toward your debt snowball. Do not invest during this time.

"But, won't that put me behind on my retirement? Shouldn't I keep on investing?" The answer is no.
Investing while you're in debt is like running in quicksand. You may be earning interest on your
investments, but you're also paying interest on your debt. They cancel each other out!

It's all about focus: focus on the immediate goals of Steps 1, 2, and 3, and you'll be much better equipped
to invest later on. Plus, holding off on all investments should motivate you to get out of debt faster.

In order to begin putting $1,000 in an emergency fund, we have to start somewhere so here is a step-by-
step approach for getting started.

   1. Determine how much money you can put into your emergency fund at this very moment. Take
      that amount in CASH and put it in an envelope labeled "Emergency Fund" and put it in a safe
   2. Call or locate online at least 3 different banks that offer money market accounts. Money market
      accounts are great places to keep your emergency fund because you can easily get to the money in
      an emergency, and the rates are better than an average savings account at any other bank. When
      calling or researching which money market account you should go with, you may want to be sure
      to get answers to following questions. You may even want to make 3 columns on a piece of paper
      and compare all three banks side-by-side with the answers you found.

           o   What is the minimum balance? This is an important question because you will have to
               have enough money to get one started. Plus, you don't want to be slapped with any fees
               should you have to use the money for an emergency.
           o   What are the interest rates of these money market accounts? Some mutual fund rates will
               change as you deposit more money. Keep that in mind because when you get to Step
               Three, you will be saving 3-6 months of your expenses in an emergency fund.
           o   How many withdrawals are you allowed each month? The fewer the better. You don't want
               to be tempted to use this fund for anything other than an emergency. Most accounts only
               allow 2 or 3 withdrawals a month.

   3. Find a bank that has someone with the "heart of a teacher" - someone who will explain everything.
      If you need help on where to get started looking, you may want to ask someone in the forums.
   4. Take your Emergency Fund envelope and head to the bank that has the best option. Remember,
      you are there to get an EMERGENCY FUND started in a MONEY MARKET ACCOUNT and
   5. Now that you have started your Emergency Fund, sit down and think of ideas that will help you
      reach your $1,000.00 goal even faster. For example, set a date right now to have a yard sale!
      Remember to add to your emergency fund every week or every pay period so that you can get
       your $1,000.00 in the bank as soon as possible. As you continue working through these other goals
       in Step One, you'll probably find other ways to fund it even faster. This goal will take a little bit
       longer than the previous goals, so just stay focused and work on getting $1,000 as fast as you can.
       Shoot for 30 days. That may seem quick, but you'd be surprised what you can do when you're
       intense about it! Creating a budget is just one more way to help you get money into your
       emergency fund.

The envelope system is very easy to use. Here's the basic principle: set up your envelope system based
upon the amounts you put in each category in your budget. If you put $600 in the 'Food' category on your
budget, then put $600 in cash in your 'Food' envelope.

The envelope system is a great way to help your control your money and spend wisely. Here are some
more tips for starting a cash envelope system:

   1. Budget each paycheck. You've probably been working out the kinks with your budget as you set
      aside your $1,000 emergency savings. Even if you haven't got it down to a science yet, keep
      working on that budget. The budget and envelope system go hand-in-hand, and they are important
      money habits to establish.
   2. Divide and conquer. Of course, there will be budget items that you cannot include in your
      envelope system like bills paid by check or automatic draft. However, you can create categories
      like food, gas, clothing and entertainment.
   3. Fill 'er up! After you've categorized your cash expenses, fill each envelope with the money allotted
      for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your
      clothing envelope for the month.
   4. When it's gone, it's gone. Once you've spent all the money in a given envelope, you're done
      spending for that category. If you go on a shopping spree and spend the $100 in your clothing
      envelope, you can't spend any more on clothes until you budget for that category again. That
      means no visits to the ATM and no stealing from another envelope!
   5. Don't be tempted. While debit cards can't get you directly into debt, they can cause you to
      overspend if used carelessly. There's something psychological about spending cash - it hurts more
      than swiping a piece of plastic. If spending cash whenever possible can become a habit, you'll be
      less likely to overspend or buy on impulse.
   6. Give it time. Like the budget, it will take a few months to perfect your envelope system. Don't
      give up after a month or two if it's not clicking. You'll get the hang of it and see how beneficial the
      envelope system is as you dump debt, build wealth and achieve financial peace!

Getting used to the envelope system takes some time, but you won't believe how much it will help you
avoid overspending. Tracking where your money goes will also help you stay focused in your spending.

                      The Truth About Money and Relationships
                                       from daveramsey.com on 03 Aug 2009

Myth: My spouse and I shouldn't talk about money because it only leads to fights.
Truth: You can't have a great relationship until you can communicate and agree about money.

Larry Burkett, noted financial author, says, "Money is either the best or the worst area of
communication in our marriages." After years as a financial counselor and working with marriage
counselors, I know that money and money fights are a major cause of divorce, not to mention the thing we
fight about the most.

So if you are married and have money fights, you are normal. But if this is a real problem area for
you, there is also an opportunity to improve your relationship and maybe even reach agreement with
your spouse. I'm not talking about agreement brought on by surrender, but rather by each person getting a
vote, understanding the other's view and finding common ground.

Let's face it – if we can agree on the checkbook, there would be nothing left to fight about except who
gets the remote!

                                      Men and Women are Different

When it comes to money, men tend to take more risks and don't save for emergencies. Men use money as
a scorecard and can struggle with self-esteem when there are financial problems.

Women tend to see money more as a security issue, so they will gravitate toward the rainy-day fund.
Because of their need for security, ladies can have a level of fear—my wife, Sharon, calls it terror—when
there are money problems. Men and women are different in how they view money, and it is largely
because they process problems and opportunities from different vantage points.

On top of the fact that men and women are different, opposites attract. Chances are, if you're married, one
of you is good at working numbers (the nerd) and the other one isn't good at working numbers (the free
spirit). That isn't the real problem. The problem is when the nerd neglects the input of the free spirit or
when the free spirit avoids participating in the financial dealings altogether.

                                        Marriage is a Partnership

Marriage is a partnership. The preacher said, "And now you are one." Both parties need to be involved in
the finances. Separating the money into his and hers and splitting the bills is a bad idea!

Listen up, nerds. Don't keep the money all to yourself. Don't use your "power" to abuse the free spirit.
Free spirits, don't just nod your head and say, "Yeah, that looks great, honey." You have a vote in the
budget committee meetings, too. Give feedback, criticism and encouragement. Work on the budget

"But what if my spouse won't get on board with me?" many of you wonder. It is tough, but with
patience and kindness, your spouse will eventually see the light (don't beat them over the head with the
need for a budget, and please don't subject your spouse to a lecture of "Dave says...").

As you work on your money together, you will begin to change your family tree. One of your main goals
in your marriage should be to pass a legacy down to your children and grandchildren.

                    Budgeting - When Only One Wants to Change
                                       from daveramsey.com on 26 Jan 2010

How do you convince your spouse that budgeting is necessary?

Statistically speaking, your chances of having a successful marriage shoot way up if you agree with your
spouse on money, kids, religion and in-laws. But it‘s the first of those four that many people don‘t want to
talk about.

If a husband or wife has bought into this idea of getting on a plan and out of debt and the other hasn‘t,
trouble could be lurking in that marriage. Here are some suggestions for talking to your other half about
working together with money.

                                             Getting The Word

Most spouses don‘t really know how much it means to their husband or wife to get on a plan. Suzy may
casually bring it up at dinner one night, and Joe will respond, ―That‘s nice.‖ After that, nothing more is
said. Joe doesn’t really get it.

Tonight, turn off the television. Put the kids to bed early and eliminate every possible distraction. Take
their hands in your hands, look them in the eye, and tell them what you are actually feeling. Are you
scared? Are you excited about the thought of having control of your money? Tell them your thoughts and
engage them in a conversation. They love you, and they‘ll listen to you if they know it means a lot.

                                          Some Fun and Games

When people think of budgets, they think of bread and water. No fun, no going out to eat, none of that.
Unless you have an extreme situation, you can still include some fun money in the budget. Make sure
to tell your partner that you will include fun money in the budget, as long as you make it together and
stick to it. Remember, this is a team effort, and you are a team.

                                           Show Me the Money

With the Credit CARD Act of 2009 going into effect this month, credit card companies are going to get
crafty in how they charge fees and interest so they can get around the law. So when you have a credit card
statement come in with a new charge, take it to your spouse and point it out. If you can convince them
that credit card companies are charging too much (which they are), then you might move your
husband or wife to do something about it.

These are just some suggestions. You know how your husband or wife is wired, so find a way to talk to
them in a language or manner that they understand. Don‘t beat them over the head, but make it absolutely
clear how important this is for your marriage and your future. Make 2010 the year that you and your other
half take control, and be on your way to a lifestyle that will make both of you smile!

                            How to Put an End to Money Arguments
                                       from daveramsey.com on 23 Jul 2009

It‘s no secret that lots of people are struggling right now, especially those who are married and can‘t agree
on money. Things seem so complicated with the economy that people lose sight of how fixing the little
things can turn a relationship from faltering to firm.

When you are having problems with your money or relationship, do you knock on the door of the person
across the street and ask them to fix it for you? Of course not. It‘s not up to them. It‘s not up to the
government. It‘s up to you. The biggest step in fixing a troubled situation is sitting down with your
husband or wife, looking at them and admitting that some work needs to be done.

After you put the kids to bed tonight, turn off the television, sit down and have a nice, long talk with
your significant other. Put everything out there—money issues, communicating together, trust …
whatever. Be totally open about everything. Once you know how you each feel, you can work toward
overcoming the issues together.

If the lack of a household budget is contributing to your money disagreements, there is good news.
Making a budget isn‘t hard to do; it‘s just gotten a bad rap. A budget is simply telling your money where
to go instead of wondering where it went. You can do this on notebook paper or with our a spreadsheet.
Write down how much you earn—down to the penny—in a month. Then write down every expense you
have—the rent or mortgage, the electric bill, groceries, clothing, insurance, etc. Write it all down. Once
you see how much money is coming in and going out each month, you can make adjustments so that you
don‘t spend more than you earn. It‘s that simple!

If you do this, you’ll start to get your money under control, and that‘s a huge thing to not fight about.
It leads to more trust, more peace, more communication and more fun in your marriage

                    Questions about Marriage and Money Management
                                           from daveramsey.com

Should my spouse and I have separate checking accounts?

No. When you get married, you become one. Money is a key area that helps bring unity. When you
handle your money together, you are agreeing on your hopes, dreams and goals. More marriages are
saved over this one issue than any other. Agree on how you spend your money, and you will begin to feel
a powerful sense of unity in your marriage.

What are some tips on getting my spouse to create a budget with me?

What do they object to about living on a plan? Do they feel controlled? Do they feel like they will lose
their freedom? Talk about those issues. You may be surprised by what you hear. After listening to their
concerns, tell them your concerns. Why do you want to budget together? How will it make you feel to
plan together? Security? Unity? Strength? By telling your spouse how you feel—and not how they should
feel—you will often get on the right track together.

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Week 2 Reading Assignment
Finding Extra Money for Your Accelerator Margin


               The Debt Snowball

      The High Cost of Using Credit Cards

                Bankruptcy Signs

   Teaching your Teen Financial Responsibility

          A Plan for Beau and Tiffany

   Five Cheap Date Ideas for Valentine’s Day

             Thoughts on Vacations

                     Finding Extra Money for Your Accelerator Margin
1. Cut Unnecessary Expenses

The easiest way is to cut items off your budget that suck up your money without giving you an
improvement in quality of life. You can also look at cheaper alternatives for things that you enjoy.

        Unnecessary Expenses: Look at things like your cable/satellite service, home and cell phones,
yard work, etc. Are you using all the premium (extra charge) channels you are paying for each month? Do
you really need a home phone and cell phones? Do you pay someone to do lawn and garden care services
that you could do yourself?

       Food: Are you paying a premium to eat frozen/precooked meals when you could fix meals
yourself for less than one-half the cost? Are you eating out for lunch at work when you could be brown-
bagging and save an average of $5 per day? Are you paying full price for groceries when you could be
using discount coupons from local newspapers, magazines, sale advertisements, and the Internet?

       Entertainment: Instead of going to the movie theaters every weekend or eating out several times
a week, try something like visiting museums and galleries on free nights, camping or visiting local and
national parks, and free concerts downtown.

      Gambling and Smoking: Eliminating smoking can decrease your bills and improve your health.
You can get rid of a money drain if you‘re a smoker or a gambler.

        Telephone: See if there is any way to reduce your telephone expense. Use Skype or another VOIP
for your land line. Double-check your cell phone plan to make sure you have the right plan. Do you need
both a cell phone and a home phone?

        Cable: Get the limited basic package temporarily to see if you miss the channels. At the very least
request to have your cable bill lowered.

2. Credit Cards:

Many, if not most Americans go out into the marketplace to buy something and the only 2 numbers they
consider are their monthly income and the total of their monthly expenses. Or they look at a specific
credit card (or credit cards) to see how much room there is before they go over their limit(s). Whatever is
left over is Spendable Credit! It is almost like it is our patriotic duty as Americans to keep our monthly
payments equal to our income!

Cut up your credit cards. Using credit actually lowers your standard of living. When you are in debt,
you are actually forced to live like you make less than you actually do, because when you make credit
purchases, you are committing a portion of your future income in interest to your creditor, which gives
you less to live on than if you save and pay cash when you purchase. The interest you pay a creditor isn‘t
working for you, it‘s forcing you to live on less, but it‘s making your creditor richer.

3. Get a Second Job or Work Overtime

Raising your income long-term is a career track issue. Raising it in the short-term means either working
overtime, or the dreaded part-time job. When you are in debt up to your eyeballs, necessities come first
and a short-term increase in income becomes a necessity if you want to get out of the mess you‘ve created
for yourself. Be willing to sacrifice in the short-term in order to win. Take any job to bring in extra money
so you can eat, get rid of debt and so that later on you can have the financial peace and do less. Having a
plan is essential to reaching the finish line and finding self-actualization.

4. Insurance

Cash value life insurance is one of the worst financial products available! If you have a Whole Life or
Universal Life policy, convert it to Term Life and apply the difference in cost to debt reduction,
emergency savings, or if you have reached the stage where you are now investing, then invest it. Whole
life and Universal Life policies are terrible with low interest rates and very high fees because it funds a
savings plan, but when you die with cash value, the insurance company KEEPS the cash value – your
beneficiary only gets the face value of the insurance policy itself! The purpose of insurance is to transfer
risk to the insurance company if you die so your family‘s financial well-being can be maintained. It is not
an investment tool – save or invest the difference between very cheap term life and expensive cash value
insurance, and you will come out way ahead.

5. What do Most People Waste Money On?

            o Eating prepared frozen meals instead of making less expensive meals yourself
            o Paying others to do tasks (like mowing the lawn) that we could do ourselves
            o Taking the kids to DairyO after the little league game instead of having a snack at
            o Wasting $5 a day eating lunch outside of work rather than taking a brown-bag lunch to

             o Going to the mall after a hard day or week because we ―deserve‖ some kind of treat.
                That treat usually ends up spending for something we don‘t need, and is usually put on
                a credit card, which makes the cost higher and the indulgence more damaging.
             o Going out for expensive (credit card) dinners – again usually prompted by a hard week.
             o Buying expensive ―toys‖ for ourselves (or for our kids) on credit to help us make up
                for the ―tough‖ life we live (or to make sure our kids have what we didn‘t have when
                we were growing up).
             o Smoking cigarettes at $4.10 a pack per day because we developed the habit when we
                were young and now we ―can’t‖ quit.
             o Having a $5.00 cup of coffee at Starbucks a couple of times a week.

       These indulgences drain more from the average American‘s income than one might imagine. Most
       people are stunned when they research and compile indulgence expenditures.

             o Keeping up with the Jones. Americans waste so much money on appearances trying to
                keep up with the ―Jones.‖ Let me tell you something – the Jones are going bankrupt!
                Everything they have is in hock up to their eyeballs, and if they ever lose their income,
                they would be homeless in 9 months or less. The Jones are living an illusion, and you

                   will be too if you try to keep up with them. Forget trying to impress family and friends
                   with your possessions. Wait until you retire early – then they‘ll really be impressed!

Finding a Balance

Look at your situation and decide what works best for you. For example, if having cable saves you money
compared to going out to dinner and movies for the whole family, look elsewhere. to cut. The main idea is
to find what doesn‘t matter to you or things that aren‘t essential to life and well being, and just cut it/them
out or reduce the expense.

Before you can get to the ―cash only‖ stage, you have to move through the bill and mortgage elimination
stages. The more wasted money you can find, and the more you can reduce or cut unnecessary expenses
to add to your Accelerator Margin, the faster you can get to that ―cash only‖ stage, begin saving for major
purchases, and start investing to build wealth and begin experiencing financial peace.


In 1913 a cartoonist named Arthur R. Momand coined the phrase "Keeping Up with the Joneses" when he
created a daily comic strip by the same name. The strip was Momand‘s satirical take on his experiences
living in an affluent society. It struck such a cord with Americans that it ran for 28 years.

We‘re not that much different today. We still strive to keep up with friends, neighbors and even strangers
– partly because we inherently crave prestige and partly because we‘re bombarded with ads for all the
things that will allegedly make us happy.

Dave Ramsey says that the most important key to financial peace is not budgeting, debt snowballing or
investing. The key is contentment. You have to know how to be content with less before you‘re able to
dig in and do the practical things that lead to financial freedom. Ironically, the people who are most
content with their finances and their possessions are those who actually have less.

Marty Nemko of Bankrate.com says, "Most wealthy people know that additional money beyond a fairly
modest income yields little additional happiness."

In her book You Don’t Have to be Rich, Jean Chatzky goes a bit further and says, "The financial habits of
people who believe money equals happiness stand in the way of achieving that happiness." This type of
person is less likely to do the things that lead to true contentment and control.

So what‘s the answer? How do we go against the grain of a greedy, possession-driven society? One thing
we can do is not allow our possessions to possess us. Working just to buy the best clothes, the newest car,
the latest technology or the biggest house is futile. Our aim should be a life of peace and freedom
where our family, health, and wholeness are the priorities.

                                          The Debt Snowball
                      From: http://www.debtleap.com/debt-articles/debt-snowball.htm

The debt snowball method is a debt repayment method that has attracted attention in the financial world
and with the borrowing public as well.

The method is most applicable to debts following a revolving type of credit such as a credit card. Dave
Ramsey, a famed financial expert and radio talk show host, developed the snowballing method. Ramsey is
the author of three best selling books of the fourteen he has authored. In order to get started with his
strategy, user employ a simple debt snowball calculator.

      List your debts from lowest to highest (ascending order.) This allows you to determine which of
       your debts you will tackle first. Resolving the lowest debts first is the main concept of the debt
       snowball method. No fancy debt snowball forms are required, just use the totals and put them in
       ascending order.
      Pay the minimum payment amount of all the debts you have. The debt snowball method ensures
       that you maintain your good credit standing. The ultimate goal is to be debt free - debt snowball
       plans let you do that, one step at a time by meeting all your financial obligations but concentrating
       on completely resolving one at a time. The method is slow, but steady.
      Taking your current budget into account, add a little extra amount on the minimum payment
       required of your smallest debt. For example, if your smallest debt obliges you to pay $100 a
       month, try to make that $150. Note all of these numbers on your debt snowball worksheet as you
       will need the figures from one step to prepare to take the next one.
      When the first debt is resolved, proceed to the second. Apply the amount you used to resolve the
       first debt to the second, with as much additional money as you can comfortably add. Since you are
       working on one less debt than before, the theory is that the payment will be no greater hardship
       that you are used to facing, but it will do more for you.
      Repeat this process until you are working on your largest debt. Although this free debt snowball
       technique takes discipline and time, it does work.
Being up to your neck in credit card debt is not a comfortable place to be. The debt snowball method is
the best way to set yourself free by following the simple instructions given above for the debt snowball.
The bottom line, however, is that the debt snowball method is not a magic wand. You will have to
exercise personal discipline and adhere to sound financial practices.

Try to follow the debt snowball method and see for yourself how effective it can be. The only debt
snowball calculator you will need are the steps listed above and the discipline to follow good financial
practices as you work on resolving your debts.

                              The High Cost of Using Credit Cards
                      From: http://financialplan.about.com/cs/creditdebt/a/CostCreditCards.htm

What The Credit Card Companies Don't Want You To Know

You receive a credit card offer in the mail: borrow up to $2000 and pay only $40 a month. The interest
rate is a little steep at 18% but the payment is still only $40 a month. Sounds like a great deal. You've
been wanting to buy a new big screen TV with all the accompanying gadgets for ages, and now you can
have it all for only $40 a month. Who COULDN'T afford this, right?

Before you sign that offer and run out to purchase your new TV, let's look at the math and see how long it
will take you to pay off this purchase at $40 per month, what you'll end up paying in interest, how long it
will take to pay off the balance, and the total amount you'll end up paying for your $2000 TV.

The minimum monthly payment on most credit cards is usually calculated as a certain percentage (often
around 2 percent) of your total balance. Remember, however, that this payment includes interest as well
as payments against the principal amount that you borrowed.

On the $2000 TV, 2 percent of the balance is $40. At 18 percent interest, your $40 payment would include
$30 in interest and only $10 towards the amount you borrowed (18% divided by 360 days = .05% per day
times 30 days in a month times $2000 outstanding balance equals $30 in interest).

If you pay the minimum balance each month (calculated as 2% of your outstanding balance), it will take
you over 30 years to pay off your $2000 TV, which will be gone long before it's paid for. What's worse,
you'll have paid nearly $5,000 in interest. The $2000 TV will have cost you nearly $7000!

To make matters even worse, think of what you would have earned if you had simply put $40 a month
into an investment earning a conservative 8 percent for the same number of years (30). Your $40 a month
would be worth over $60,000 and you would have earned almost $46,000 in interest on your investment.

Many people get caught up in credit card offers that are "too good to pass up." The question is: "good for
whom?" Certainly not good for you. The example of the TV purchase illustrates the extremely high cost
of paying the minimum balance on your credit cards.

Educate yourself about the true cost of credit and the ways some credit card companies entice you to get
deeper and deeper in debt. A great source for information on credit and debt is About's Credit/Debt
Management site.

                                             Bankruptcy Signs
                       From: http://financialplan.about.com/od/creditanddebt/a/Bankruptcy.htm

Bankruptcies are occurring at an alarming level in the United States. Bankruptcy doesn't happen just to
financial deadbeats. It could happen to your family member, your neighbor, or your friend. It could even
happen to you. Here are eight warning signs that you're headed for possible bankruptcy, and eight tips for
avoiding it and changing course before it's too late.

Bankruptcy Warning Sign #1: No health insurance or inadequate coverage. Medical bills are a factor
in one out of five bankruptcies.

Bankruptcy Warning Sign #2: Maxing out on your credit cards or charging more than you can pay
off each month. Credit card debt is one of the major factors in many bankruptcies. A good rule of thumb
is to use no more than 30% to 40% of your available credit at any one time. This gives you flexibility in
case of job loss, illness, divorce, or other threat to your income.

Bankruptcy Warning Sign #3: Over-using home equity loans. Think twice before you use your home
equity loan or line of credit for items other than home improvements. Make sure you can afford the
payments comfortably.

Bankruptcy Warning Sign # 4: No emergency fund. If you live from paycheck to paycheck with little
or no savings for emergencies, you're at higher risk of going bankrupt. 43% of American households have
less than $1,000 saved, an alarming statistic.

Bankruptcy Warning Sign #5: Paying the minimum balance on your credit cards. Since it can take
20 to 30 years to pay off your credit card balance when you pay only the minimum payment, if that's all
you can afford to pay, you really can't afford to buy whatever it is you've been buying.

Bankruptcy Warning Sign #6: Co-signing a loan for someone else. Co-signing loans is a common
factor in many bankruptcies when the person you co-signed for defaults on the loan payments and you're
held responsible by the lender.

Bankruptcy Warning Sign # 7: Tax lien or foreclosure on your home, or repossession of a car or
other item you failed to make timely payments on. These are signs that you've lost your grip on your
financial situation. Take them seriously.

Bankruptcy Warning Sign #8: Borrowing too much on student loans. You may end up finding your
student loan payments so high you can't afford your living expenses.

The key to avoiding bankruptcy or other, less dire but no less unpleasant financial problems is to have a
firm grip on your finances by following these eight tips:
    1. Avoid impulse spending.
    2. Don't use a credit card unless you have the cash to pay it off.
    3. Tear up credit card offers you receive in the mail.
    4. Set up a budget and stick to it.
    5. Don't buy more house than you can comfortably afford.
    6. Make sure you're adequately covered by insurance (medical, homeowners, auto).
    7. Don't make speculative or high-risk investments.
    8. Don't incur joint debt with others – either family or friends.
                          Teaching Your Teen Financial Responsibility
                       From: http://beginnersinvest.about.com/library/weekly/n073002.htm

Six Life Lessons You Should Instill Before They Leave Home
Face it. Whether or not you want to think about it, in a few short years, your teenager will be on their
own, making their way through the world. One of the biggest advantages you can give him or her is a
basic education in finance. If your teen can manage their own money, they will have a higher standard of
living, won't have to call home for cash [giving them a greater sense of independence while easing the
burden on your checkbook], and have the freedom to choose their path without worrying about student
loans, car payments, or credit card debt.

Your Level of Freedom is Closely Tied to Your Level of Debt
Debt is the life equivalent of handcuffs. It is by far one of the most powerful and restricting forces in the
history of society. This being the case, it makes sense that you should do everything in your power to
avoid it altogether. When you make your car, house, or student loan payment, you should always pay as
much over the required monthly payment as possible. If your car payment is $350, send an extra $30 or
$40 each month. The interest savings, especially on long-term items such as a house, can add up to tens
or hundreds of thousands of dollars.

Avoid Credit Card Debt Above All Else
Credit card debt is brutal. If you have a balance on any one of your credit cards, you have no business
sticking money in investments or a savings account. If you're making 4% on a passbook savings account
but paying 20+% interest on your credit card balance, you're paying 16% for the right to earn that 4%.
This is one of the stupidest things you can do.

Open an IRA and Contribute to it as Young as Possible
The day your teenager turns eighteen, you should open an IRA. $1,000 invested at eighteen years old in a
Roth IRA is worth $134,952.21 by retirement assuming an eleven-percent rate of return. If your teen
waits until they are twenty-five years old, that same $1,000 is worth only $65,000. That's less than half!
The difference is due to the nature of compound interest.

A person who begins investing young and contributes only a few thousand dollars each year, is almost
certain to become a millionaire by retirement. As long as the investments are chosen well, it's nearly
impossible not to become rich!

Choose Your College Wisely
In most cases, there is very little difference between a $30,000 private college and a $12,000 state
university. What matters is what you do with your degree, not where it came from [except in highly-
specialized fields such as law or medicine]. Strapping yourself with an extra $64,000 in debt can
seriously change your plans for life. Several months after graduation, you will be forced to make your
first student loan payment. This could result in taking a sub-par job for the sake of an income, at the
expense of a better opportunity later.

Beware the Small Foxes
It's been said that small foxes spoil the vine. Your financial success is largely determined by the
mundane, day-to-day decisions. If you purchase a $500 television, you're likely to go to several different
stores, compare prices, and find the best bargain. Ironically, the same week, you may spend $50 at a
restaurant, $5 at the gas station buying a coke and newspaper, $10 at the movies, $85 for a sweater at
Banana Republic, $20 for a candle, $30 for a book, $5 for a frap at Starbucks... you get the picture. Those
small expenses are fine by themselves, but at the end of the month when you tally them up, you may find
you are unwittingly spending your wealth away.

Know the State of Your Flocks - Use a Software Program to Track Your Finances
King Solomon, the wealthiest man in history, once said, "Be diligent to know the state of your flocks, for
riches do not endure forever..." If he found it necessary to keep track of his day-to-day finances, you
[with your much smaller pocketbook] should find it even more so. In fact, this is the easiest way to track
your "little foxes". Personally, I prefer Microsoft Money which is inexpensive, easy to use, and can
automatically download stock and mutual fund quotes from the Internet, automatically updating the value
of your accounts.

                                        A Plan for Beau and Tiffany


It all started when Beau, a 26-year-old paint contractor, started his own business last February. He landed
a job painting an apartment complex, but he didn't have money for upfront expenses. His mother-in-law
loaned him $10,000, and the paint company allowed him to run up a $13,000 tab. Their situation got
worse when Beau's general contractor failed to pay him $24,000 for some prior work. Now, work has
slowed considerably, and they are living off 25-year-old Tiffany's salary as an MRI technician.

"We really haven't been buying anything lately. We've been barely scraping by," she said.

As bad as the income situation is, it's not the only problem for this Missouri couple. Things get really
messy when you look at their debt.

      $21,000 on credit cards
      $52,000 in student loans
      $13,000 in business debt
      $42,500 on car loans ($29,000 on a 2009 Mercury Mariner worth $21,000, and $13,500 on a 2005
       Ford F150 worth $14,000)

Add it all up and they're looking at nearly $130,000 in debt! In the midst of all this they welcomed their
new daughter, Ryann, into the world about 6 months ago.

"There's a lot of stuff that you don't really know until you put it on paper. You just make your payments
and when you add it up, you realize you're in over your head," Beau said.

But that's where these two are turning things around. In an effort to save money, they've sold their
$130,000 house and are moving in with her mother, saving them $1,053 a month on their $45,000-plus
salary. "With that saved money, I'm trying to fit our budget to what I make because I don't know from one
day to the next what Beau will make," said Tiffany.

Beau is now looking at part-time work on the weekends, in addition to his business, until things pick up
again. Their long-term goal is to pay for Ryann's college so that she won't have student loan debt. Here is
their financial picture at a glance:

Their Financial Details

Many of Tiffany and Beau's problems could have been prevented with a simple plan (a budget!). Not
having a realistic budget led them to allocate $100 a month for groceries and $1,000 in car payments!
Their story is common, though. Poor budgeting leads to poor money management which leads to no
savings and lots of debt.

Budget Change Highlights

1. INCOME: Like many small-business owners, Beau's income fluctuates greatly. Since they don't
have money saved to ride out slow periods, Beau needs to pick up extra work wherever he can. Any
money they can add to their debt snowball would be huge.

2. GIVING: Giving to others liberates your soul and helps bring you contentment. If Beau and
Tiffany set aside just 5% of their income for giving, it will positively change their attitudes toward
money, and they will get out of debt faster than if they don't give!

3. HOUSING: Tiffany and Beau have already taken some bold steps toward cleaning up their
financial mess. They sold their house and expect to net $4,100 on the sale. In the meantime, they're
moving in with Tiffany's mom and paying her $200 a month in rent, freeing up $1,100 to attack their
debt. It may not be an ideal situation, but short-term sacrifices like this will help them win in the long

4. GROCERIES AND EATING OUT Tiffany and Beau were seriously underestimating what they
were spending for food. With a new baby in the house, $100 a month isn't even close. That amount per
week is more realistic for a family of three. We've also included $120 a month for eating out. It will
take a few years to clean up this mess, so a small amount allocated to an occasional dinner out will
allow for a little vacation from an otherwise "beans and rice plan." They just need to be sure that when
the envelope is empty, there are no dinners out.

5. CLOTHING & PERSONAL CARE Now is not the time to update their wardrobe, but shoes do
wear out and babies outgrow clothes quickly. Setting aside a little money each month to cover these
expenses will help Tiffany and Beau stay on budget.

6. ENTERTAINMENT & BLOW MONEY One way to make sure their budget doesn't explode is to
include a small relief valve. A little bit of money set aside for entertainment and a small amount they
can blow for whatever they want - a Friday night pizza or a couple of movie tickets - will help them
stay committed.

Debt Snowball Plan


What's Right

   1.   Everybody's on board with getting intense.
   2.   They've cut up the credit cards and looking for extra jobs.
   3.   They've sold the house, netting $4,100, and they have an affordable place to live.
   4.   They've identified items to sell (generator, paint sprayers, etc.).

What's Wrong

   1. They have lots of debt.
   2. Their vehicles are very expensive, and one is upside down.
   3. They were in denial about what they were actually spending.

Dave's Plan to Get Gazelle Intense

These cars need to be sold yesterday! You're spending almost as much on your vehicles as you were on
the mortgage, and that's absolutely insane! Get rid of these cars. Next, sit down with your parents, and
walk through the process of how you will pay them back. You don't want to owe money to family
members. Thanksgiving dinner tastes different when you do. If the contractor pays the $24,000 that's
owed, use it to pay off Mom's $10,000 credit card and the $13,000 in business debt.

Sell everything that isn't nailed down and temporarily stop your 401(k) contributions. You need all the
extra money you can get your hands on. You should be able to kill the smallest credit card just by selling
stuff. Next, get a part-time job throwing boxes at UPS or delivering pizzas until this mess is cleaned up.

The house is sold. Now, allocate the proceeds. Put the first $1,000 toward your baby emergency fund. Get
any car repairs done that you need in order to sell them, and then buy a couple of $1,000 beaters until you
can climb out of this hole. Put the remainder on your debt snowball and get this thing moving!

Their Future

It will take some big-time sacrifice for Beau and Tiffany to dig out of this, but it can be done. They will
have to commit to amputating their lifestyle. Selling the house is a good start, but getting rid of the
ridiculous cars and getting more part-time jobs will really break this open. The next couple of years are
not going to be fun, but if they stick with their plan it will make all the years after that worth it.

The good news is that they are young and have plenty of time to clean up the mess and build the future
they've dreamed of. They're also highly motivated, not afraid to sacrifice and work hard, and are willing
to learn from their mistakes. In other words, they're gazelle intense!

And the rewards for all of this hard work? Well, like Dave always says, "If you'll live like no one else,
later, you can live like no one else." By following this plan, Tiffany and Beau will be debt-free by the
time they're 30. And what about their goal to send daughter, Ryann, to college without student loans?
Take a look at this timeline that shows the kind of future they can have if they maintain their intensity and
stick to their budget.


                           Five Cheap Date Ideas for Valentine’s Day
                                     from daveramsey.com on 26 Jan 2010

Valentine‘s Day is almost here. Across the nation, men everywhere are scrambling for ideas. Will it be
flowers and chocolate or dinner and a movie? Let‘s face it, fellas. If you‘ve been in a relationship for any
amount of time, creative and cheap date ideas can be hard to come by. And with January now in the
rearview mirror, it may seem easy to forget about that New Year‘s resolution to tighten up the budget.

But this Valentine‘s Day, you don’t have to break the bank to create memories and have a good time.
Here are five ideas to get your wheels turning:

Dinner and a Movie … The Remix

Okay, we know, dinner and a movie is so cliché. But what about a candlelit home-cooked meal and a
romantic rental movie? You don‘t have to buy filet mignon and lobster. You can get great deals on
chicken, pork and certain types of fish. Pair it up with a little pasta, and you‘re ready to treat your
significant other to an unforgettable evening!

The Open Road

Just get in the car with your special lady friend and drive! You might spend a little on gas, but you‘ll
create some lasting memories as you travel to a town you have never visited or a famous landmark. You
could also revisit the special places around town where you‘ve created fun memories and take pictures

Game Night

Who doesn‘t love a good board game? Find a few classic board games, invite some friends over, and
make a night of it. Or, if you have a Wii, then you have even more options—bowling, Rock Band and
Mario Kart to name a few. Having some Valentine‘s-themed food on hand will add to the fun—red-velvet
cupcakes and heart-shaped candy are always crowd pleasers.

Night at the Museum

Two tickets to a local museum usually aren‘t too expensive. Learn a little about art or history—and each
other! Combine this idea with your home-cooked dinner and a movie or game night, and you‘ll have a full
day of fun.

Take A Hike

Pack a lunch, grab a few water bottles, and hit the trail. You‘ll be amazed at the quality of conversation
you can have with someone while you are hiking up a mountain or through a trail in the woods. After all,
it is Valentine‘s Day, so why not get your heart in shape?

You can come up with plenty of cheap date ideas on your own. Just follow your passions (don‘t do
something just because it‘s cheap), and think outside the box (of chocolates).

And, remember, the memories will last a lot longer than the gourmet chocolate and expensive roses.
Keep that in mind as you are planning your Valentine‘s Day date and other dates throughout the year!

                                       Thoughts on Vacations
                                       from daveramsey.com on 21 Jul 2009

One of Dave's radio show listeners emailed to get some advice:

We have a few thousand saved up for a trip this summer as a way to reward ourselves for working so
diligently on our debt snowball lately. We deserve a break! Should we go? Is now the best time?

                                           What did Dave say?

Waaaahhhh! I didn‘t go on vacation for two years while I was cleaning up my mess. Listen, your life has
been a trip to the beach. Now it‘s time to clean up your mess! I‘m not saying that you should never go on
a vacation. Just don‘t go when you‘re $20,000 in debt! Suck it up and live like no one else now so later
you can live like no one else. That‘s what I did. Now I can go to the beach any time I want! You‘ve got to
break this cycle in your head that you deserve stuff. None of us deserve squat.

Traveling somewhere for a vacation is a luxury, not a necessity. We must remember that. So many people
don‘t understand the difference. And whoever said you have to travel and spend lots of money on a
vacation? Ever heard of a ―staycation‖? It‘s a vacation from everyday life where you stay close to
home—what a novel idea! You can be a hometown tourist, spend extra quality time with your family, and
forget about work for a while. If you‘re still working on your debt snowball, this is the way to go.

If you‘re out of debt, have the money saved, and have planned your vacation, by all means, go! Go now
while the sale light is on! You‘ve sacrificed, and your hard work and dedication have literally paid off.
Let me remind you that everything is on sale big time! And if you pay with cash, you‘re more likely to
get even greater deals!

Don‘t fall for the line that the economy will slump if you don‘t do your part by traveling this summer.
That is completely absurd. The economy will continue to improve regardless of how you choose to spend
a few days off. Once again, you have to be a mature adult and do what‘s best for you.

Whether you‘re going on a Mediterranean cruise or grilling out at the neighborhood park, you can have
an absolute blast on vacation this summer. It‘s all about your attitude and staying within your budget.

       Week 3 Reading Assignment
                  No credit score, no mortgage?

                       Your Credit Report

                        Your Credit Score

                          Identity Theft

                         Debt Collection

                     New Credit Card Rules

North Carolina Consumers Have a Right to Obtain a Security Freeze

                 Keeping Intensity During Step 3

                  Some Questions and Answers

                The Great Credit Report Rebellion

                                    No credit score, no mortgage?
                                    From: Dave Ramsey Says - January 4, 2010

Dear Dave,
I've never had a credit card or a bank loan, so I really don't have any established credit. What
should I do when it comes to a cell phone contract or establishing utility service? Also, what will
happen if I try to get a mortgage loan at some point?

Dear Matthew,
There's usually no exception on cell phone contracts or utility service. Chances are you'll have to put up
the deposit, and you'll probably get it back in six months or maybe a year from now. I still run into this
kind of thing from time to time. It's almost like you don't exist if you don't have debt and a credit rating.

The mortgage lending rules are changing almost daily at this point. Under the current rules, there are two
ways to be in a great position to get a home loan. One is to have credit running out of your ears and a
huge FICO score. This is pretty stupid when you think about it, but it will get you a home loan almost
instantly. The second is to have no credit whatsoever. So, it's really the people in the middle who are
feeling the pinch.

When you have no credit, the lender has to do the underwriting themselves. It's something banks used to
do, back when they actually had some sense when it came to making loans. They take a look to see if you
have a stable job and a decent income. They'll probably want some kind of proof that you pay your bills
on time, and this could be as simple as showing them a few electric bills and other receipts to show that
you honor your financial commitments.

                                             Your Credit Report

                      From: http://financialplan.about.com/cs/creditdebt/a/YourCreditRepor.htm

Why It's Important to Know What's On It and How to Fix Errors

Did you know that your purchasing and payment habits are tracked by your bank, credit card companies,
department stores, and other creditors and reported to credit bureaus so potential lenders can decide
whether they want to take the risk of lending you money or issuing you credit? These bureaus also collect
such information as your job history and whether you own your home.

Why is it important to know what's on your credit report? For one thing, if you're thinking about buying a
house or applying for credit for any other big purchase, you'll need a clean credit report, and it's always
best to know what's on it before your lender does. This will give you an opportunity to clean up any
discrepancies or errors, which are fairly common, and which can throw a monkey wrench in the works if
not resolved.

Ideally, you should check your credit report with each of the three credit bureaus, Equifax, Trans Union,
and Experian, once a year or so. You're entitled by law to one free copy of your credit report from each of
these three credit bureaus once a year. You can get all three at once or spread them out over the year. If
you order copies more frequently than that, each report will cost no more than around $10 and in some
states considerably less.

If you've been turned down for credit in the last 60 days because of something a lender saw on your credit
report, you can obtain a copy of your report free of charge. Lenders are required by law to notify you of
this right if they deny you credit.

When you get your credit reports, review them carefully to make sure all the loans and credit accounts
listed really belong to you, and that all the accounts listed as open are actually current loans or balances. If
a loan you've paid off or a credit card that was cancelled is still listed as open, contact the credit bureau
and ask for your report to be corrected.

Usually the credit report you obtain from the credit bureau will include a form for reporting any
inaccuracies. Give as much detail as possible, and if you have documents that back up your claim, provide
copies. By law, the credit bureau must investigate your claim, but even if they decide your report is
accurate as it stands, you should continue to try to correct the report by writing a letter explaining your
side of the story (not to exceed 100 words), which the bureau is required to provide to anyone requesting
your credit report.

When deciding whether to approve credit, lenders take the following into consideration:

   o Your payment history--do you pay bills on time?
   o Have you had a bill referred to a collection agency?
   o Have you ever declared bankruptcy?
   o How much debt do you have outstanding compared to your credit limits? The closer your debt is
     to your credit limit, the less favorable.
   o How long is your credit history? If you haven't had much of a credit history yet, prompt payments
     are even more important.

   o Have you applied for more credit lately? Too many applications for credit has a negative impact
     on your chances for approval.
   o How many credit accounts do you have? Too many is considered a negative.

Information is retained in your credit report for up to seven to ten years. If you have negative items in
your history, you can gradually repair your credit by consistently paying your bills on time from now on,
paying down your balances, and not taking on any new debt. Lenders will take your improved record into
consideration when deciding whether to approve credit, especially if you've been paying on time for at
least a year.

                                            Your Credit Score
               From: http://financialplan.about.com/od/creditdebtmanagement/a/FICO-Credit-Score.htm

You may have heard that your credit score is important, but what is a FICO score? FICO is short for Fair
Isaac and Co. The Fair Isaac Company developed custom software back in the 1980s that helped other
companies determine a credit risk based on a number derived from a person‘s credit history. This number
soon became a standard that was adopted by the three main credit bureaus: Experian, TransUnion, and
Equifax. The FICO score ranges between 300 and 850.

Credit Score vs. Credit Report

A credit score and a credit report are two different things, although the credit score ultimately depends on
your credit report. Your credit report is simply a detailed account of your credit history. The report will
contain information such as:

   o   Current credit accounts
   o   Payment history
   o   Credit inquiries
   o   Credit utilization
   o   Bankruptcy

Your credit report itself does not have a FICO number. It is simply a report of your current and past credit
history. Most credit history will only go back seven years, although a bankruptcy will stay on your report
for ten years. You‘re entitled to a free credit report each year and it‘s always a good idea to check it
annually to make sure it‘s correct. Here‘s how to get your free credit report.

A FICO credit score is based off of your credit history, but it‘s not actually a part of your credit report.
Instead, the three major credit bureaus will calculate your FICO based on your credit history they have on
file. This means you can have up to three different FICO scores at one time. Your FICO score does not
come with your credit report and it isn‘t something you‘re entitled to annually. You may have to pay a fee
to actually receive your score.

What Makes Up a Credit Score

A credit score takes into account a lot of different information from your credit report, but it‘s not all
treated equally. Some aspects of your credit history are more important than others and will weigh more
heavily on your overall score. Your FICO score is essentially made up of the following:

   o   Payment History – 35%
   o   Total Amounts Owed – 30%
   o   Length of Credit History – 15%
   o   New Credit – 10%
   o   Type of Credit in Use – 10%

As you can see, the bulk of your credit score comes from your payment history and how much debt you
actually have. Those two items account for 65% of your score. So, if you‘re really looking to improve
your credit score, these are the areas you‘ll want to tackle first.

Why Your FICO Credit Score is Important

We‘ve determined what makes up a credit score, but why is it so important? Your credit score will follow
you for your entire life and if you are ever trying to borrow money, the lender is going to look at your
credit score to determine whether or not to lend money to you. Need to buy a car? They will check your
credit score. Looking for a mortgage? You can bet they are checking your credit score. In fact, even some
employers are checking credit scores when hiring to possibly determine who would make a good

Not only does your credit score determine whether or not you‘ll receive financing, it also determines how
much it will cost you to borrow that money. People with higher credit scores are deemed to be less of a
risk and therefore will typically receive the lowest interest rates. Those with lower scores are viewed as
more of a risk so the bank will offset that risk by lending you money at a higher interest rate. And when
you‘re talking about larger loans such as buying a vehicle or a home, just an extra interest rate point could
add up to thousands, and even tens of thousands of dollars wasted on interest.

Improving Your Credit Score

What happens if you have made some mistakes in the past and now your credit score is low? Don‘t worry.
The good news is that your credit score is constantly updating, so every month as you begin to make
improvements to your credit history, your score will be sure to follow. But keep in mind that items on
your report will stay there for seven years, so it will take some time for serious negative marks to
eventually disappear completely.

There are a number of things you can do to improve your credit score. Start with the basics and make sure
you‘re making all of your payments on time. Remember, payment history is the single greatest factor in
your credit score. If you make payments over time, you‘ll slowly start to raise that score. Second, reduce
your total amount of debt. The second largest impact on your score is how much debt you have, so if you
can put a dent in your overall debt you‘ll also begin to make some serious headway.

                                                 Identity Theft
                From: http://www.ftc.gov/bcp/edu/microsites/idtheft/consumers/about-identity-theft.html

What is identity theft?

Identity theft occurs when someone uses your personally identifying information, like your name, Social
Security number, or credit card number, without your permission, to commit fraud or other crimes.

The FTC estimates that as many as 9 million Americans have their identities stolen each year. In fact, you
or someone you know may have experienced some form of identity theft.
The crime takes many forms. Identity thieves may rent an apartment, obtain a credit card, or establish a
telephone account in your name. You may not find out about the theft until you review your credit report
or a credit card statement and notice charges you didn‘t make—or until you‘re contacted by a debt

Identity theft is serious. While some identity theft victims can resolve their problems quickly, others
spend hundreds of dollars and many days repairing damage to their good name and credit record. Some
consumers victimized by identity theft may lose out on job opportunities, or be denied loans for
education, housing or cars because of negative information on their credit reports. In rare cases, they may
even be arrested for crimes they did not commit.

How do thieves steal an identity?

Identity theft starts with the misuse of your personally identifying information such as your name and
Social Security number, credit card numbers, or other financial account information. For identity thieves,
this information is as good as gold.
Skilled identity thieves may use a variety of methods to get hold of your information, including:

Dumpster Diving. They rummage through trash looking for bills or other paper with your personal
information on it.

Skimming. They steal credit/debit card numbers by using a special storage device when processing your

Phishing. They pretend to be financial institutions or companies and send spam or pop-up messages to
get you to reveal your personal information.

Changing Your Address. They divert your billing statements to another location by completing a change
of address form.

Old-Fashioned Stealing. They steal wallets and purses; mail, including bank and credit card statements;
pre-approved credit offers; and new checks or tax information. They steal personnel records, or bribe
employees who have access.

Pretexting. They use false pretenses to obtain your personal information from financial institutions,
telephone companies, and other sources.

What do thieves do with a stolen identity?

Once they have your personal information, identity thieves use it in a variety of ways.

   o Credit card fraud:
   o They may open new credit card accounts in your name. When they use the cards and don't pay the
     bills, the delinquent accounts appear on your credit report.
   o They may change the billing address on your credit card so that you no longer receive bills, and
     then run up charges on your account. Because your bills are now sent to a different address, it may
     be some time before you realize there's a problem.
   o Phone or utilities fraud:
   o They may open a new phone or wireless account in your name, or run up charges on your existing
   o They may use your name to get utility services like electricity, heating, or cable TV.
   o Bank/finance fraud:
   o They may create counterfeit checks using your name or account number.
   o They may open a bank account in your name and write bad checks.
   o They may clone your ATM or debit card and make electronic withdrawals your name, draining
     your accounts.
   o They may take out a loan in your name.
   o Government documents fraud:
   o They may get a driver's license or official ID card issued in your name but with their picture.
   o They may use your name and Social Security number to get government benefits.
   o They may file a fraudulent tax return using your information.
   o Other fraud:
   o They may get a job using your Social Security number.
   o They may rent a house or get medical services using your name.
   o They may give your personal information to police during an arrest. If they don't show up for their
     court date, a warrant for arrest is issued in your name.

How can you find out if your identity was stolen?

The best way to find out is to monitor your accounts and bank statements each month, and check your
credit report on a regular basis. If you check your credit report regularly, you may be able to limit the
damage caused by identity theft.

Unfortunately, many consumers learn that their identity has been stolen after some damage has been done.

You may find out when bill collection agencies contact you for overdue debts you never incurred.

You may find out when you apply for a mortgage or car loan and learn that problems with your credit
history are holding up the loan.

You may find out when you get something in the mail about an apartment you never rented, a house you
never bought, or a job you never held.

What should you do if your identity is stolen?

Filing a police report, checking your credit reports, notifying creditors, and disputing any unauthorized
transactions are some of the steps you must take immediately to restore your good name.

Should you file a police report if your identity is stolen?
A police report that provides specific details of the identity theft is considered an Identity Theft Report,
which entitles you to certain legal rights when it is provided to the three major credit reporting agencies or
to companies where the thief misused your information. An Identity Theft Report can be used to
permanently block fraudulent information that results from identity theft, such as accounts or addresses,
from appearing on your credit report. It will also make sure these debts do not reappear on your credit
reports. Identity Theft Reports can prevent a company from continuing to collect debts that result from
identity theft, or selling them to others for collection. An Identity Theft Report is also needed to place an
extended fraud alert on your credit report.

You may not need an Identity Theft Report if the thief made charges on an existing account and you have
been able to work with the company to resolve the dispute. Where an identity thief has opened new
accounts in your name, or where fraudulent charges have been reported to the consumer reporting
agencies, you should obtain an Identity Theft Report so that you can take advantage of the protections you
are entitled to.

In order for a police report to entitle you to the legal rights mentioned above, it must contain specific
details about the identity theft. You should file an ID Theft Complaint with the FTC and bring your
printed ID Theft Complaint with you to the police station when you file your police report. The printed
ID Theft Complaint can be used to support your local police report to ensure that it includes the detail

A police report is also needed to get copies of the thief‘s application, as well as transaction information
from companies that dealt with the thief. To get this information, you must submit a request in writing,
accompanied by the police report, to the address specified by the company for this purpose.

How long can the effects of identity theft last?

It's difficult to predict how long the effects of identity theft may linger. That's because it depends on many
factors including the type of theft, whether the thief sold or passed your information on to other thieves,
whether the thief is caught, and problems related to correcting your credit report.

Victims of identity theft should monitor financial records for several months after they discover the crime.
Victims should review their credit reports once every three months in the first year of the theft, and once a
year thereafter. Stay alert for other signs of identity theft.

Don't delay in correcting your records and contacting all companies that opened fraudulent accounts.
Make the initial contact by phone, even though you will normally need to follow up in writing. The
longer the inaccurate information goes uncorrected, the longer it will take to resolve the problem.

What can you do to help fight identity theft?

A great deal.

Awareness is an effective weapon against many forms identity theft. Be aware of how information is
stolen and what you can do to protect yours, monitor your personal information to uncover any problems
quickly, and know what to do when you suspect your identity has been stolen.

Armed with the knowledge of how to protect yourself and take action, you can make identity thieves' jobs
much more difficult. You can also help fight identity theft by educating your friends, family, and

members of your community. The FTC has prepared a collection of easy-to-use materials to enable
anyone regardless of existing knowledge about identity theft to inform others about this serious crime.

                                              Debt Collection
                         From: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm

If you‘re behind in paying your bills, or a creditor‘s records mistakenly make it appear that you are, a debt
collector may be contacting you.

The Federal Trade Commission (FTC), the nation‘s consumer protection agency, enforces the Fair Debt
Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or
deceptive practices to collect from you.

Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes
collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts
and then try to collect them.

Here are some questions and answers about your rights under the Act.

What types of debts are covered?

The Act covers personal, family, and household debts, including money you owe on a personal credit card
account, an auto loan, a medical bill, and your mortgage. The FDCPA doesn‘t cover debts you incurred to
run a business.

Can a debt collector contact me any time or any place?

No. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning
or after 9 at night, unless you agree to it. And collectors may not contact you at work if they‘re told
(orally or in writing) that you‘re not allowed to get calls there.

How can I stop a debt collector from contacting me?

If a collector contacts you about a debt, you may want to talk to them at least once to see if you can
resolve the matter – even if you don‘t think you owe the debt, can‘t repay it immediately, or think that the
collector is contacting you by mistake. If you decide after contacting the debt collector that you don‘t
want the collector to contact you again, tell the collector – in writing – to stop contacting you. Here‘s how
to do that:

Make a copy of your letter. Send the original by certified mail, and pay for a ―return receipt‖ so you‘ll be
able to document what the collector received. Once the collector receives your letter, they may not contact
you again, with two exceptions: a collector can contact you to tell you there will be no further contact or
to let you know that they or the creditor intend to take a specific action, like filing a lawsuit. Sending such
a letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact.
The creditor or the debt collector still can sue you to collect the debt.

Can a debt collector contact anyone else about my debt?

If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than
you. If you don‘t have an attorney, a collector may contact other people – but only to find out your
address, your home phone number, and where you work. Collectors usually are prohibited from
contacting third parties more than once. Other than to obtain this location information about you, a debt
collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your

What does the debt collector have to tell me about the debt?

Every collector must send you a written ―validation notice‖ telling you how much money you owe within
five days after they first contact you. This notice also must include the name of the creditor to whom you
owe the money, and how to proceed if you don‘t think you owe the money.

Can a debt collector keep contacting me if I don’t think I owe any money?

If you send the debt collector a letter stating that you don‘t owe any or all of the money, or asking for
verification of the debt, that collector must stop contacting you. You have to send that letter within 30
days after you receive the validation notice. But a collector can begin contacting you again if it sends you
written verification of the debt, like a copy of a bill for the amount you owe.

What practices are off limits for debt collectors?

Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For
example, they may not:

      use threats of violence or harm;
      publish a list of names of people who refuse to pay their debts (but they can give this information
       to the credit reporting companies);
      use obscene or profane language; or
      repeatedly use the phone to annoy someone.

False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they
may not:

      falsely claim that they are attorneys or government representatives;
      falsely claim that you have committed a crime;
      falsely represent that they operate or work for a credit reporting company;
      misrepresent the amount you owe;
      indicate that papers they send you are legal forms if they aren‘t; or
      indicate that papers they send to you aren‘t legal forms if they are.

Debt collectors also are prohibited from saying that:

      you will be arrested if you don‘t pay your debt;
      they‘ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to
       take the action and intend to do so; or
      legal action will be taken against you, if doing so would be illegal or if they don‘t intend to take
       the action.

Debt collectors may not:

      give false credit information about you to anyone, including a credit reporting company;
      send you anything that looks like an official document from a court or government agency if it
       isn‘t; or
      use a false company name.

Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For
example, they may not:

      try to collect any interest, fee, or other charge on top of the amount you owe unless the contract
       that created your debt – or your state law – allows the charge;
      deposit a post-dated check early;
      take or threaten to take your property unless it can be done legally; or
      contact you by postcard.

Can I control which debts my payments apply to?

Yes. If a debt collector is trying to collect more than one debt from you, the collector must apply any
payment you make to the debt you select. Equally important, a debt collector may not apply a payment to
a debt you don‘t think you owe.

Can a debt collector garnish my bank account or my wages?

If you don‘t pay a debt, a creditor or its debt collector generally can sue you to collect. If they win, the
court will enter a judgment against you. The judgment states the amount of money you owe, and allows
the creditor or collector to get a garnishment order against you, directing a third party, like your bank, to
turn over funds from your account to pay the debt.

Wage garnishment happens when your employer withholds part of your compensation to pay your debts.
Your wages usually can be garnished only as the result of a court order. Don‘t ignore a lawsuit summons.
If you do, you lose the opportunity to fight a wage garnishment.

Can federal benefits be garnished?

Many federal benefits are exempt from garnishment, including:

      Social Security Benefits
      Supplemental Security Income (SSI) Benefits
      Veterans‘ Benefits
      Civil Service and Federal Retirement and Disability Benefits
      Service Members‘ Pay
      Military Annuities and Survivors‘ Benefits
      Student Assistance
      Railroad Retirement Benefits
      Merchant Seamen Wages
      Longshoremen‘s and Harbor Workers‘ Death and Disability Benefits
      Foreign Service Retirement and Disability Benefits
      Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S.
      Federal Emergency Management Agency Federal Disaster Assistance

But federal benefits may be garnished under certain circumstances, including to pay delinquent taxes,
alimony, child support, or student loans.

Do I have any recourse if I think a debt collector has violated the law?

You have the right to sue a collector in a state or federal court within one year from the date the law was
violated. If you win, the judge can require the collector to pay you for any damages you can prove you
suffered because of the illegal collection practices, like lost wages and medical bills. The judge can
require the debt collector to pay you up to $1,000, even if you can‘t prove that you suffered actual
damages. You also can be reimbursed for your attorney‘s fees and court costs. A group of people also
may sue a debt collector as part of a class action lawsuit and recover money for damages up to $500,000,
or one percent of the collector‘s net worth, whichever amount is lower. Even if a debt collector violates
the FDCPA in trying to collect a debt, the debt does not go away if you owe it.

What should I do if a debt collector sues me?

If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or
through your lawyer, by the date specified in the court papers to preserve your rights.

Where do I report a debt collector for an alleged violation?

Report any problems you have with a debt collector to your state Attorney General‘s office
(www.naag.org) and the Federal Trade Commission (www.ftc.gov). Many states have their own debt
collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney
General‘s office can help you determine your rights under your state‘s law.

For More Information
To learn more about debt collection and other credit-related issues, visit www.ftc.gov/credit and
MyMoney.gov, the U.S. government‘s portal to financial education.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the
marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint
or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-
4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network,
a secure online database and investigative tool used by hundreds of civil and criminal law enforcement
agencies in the U.S. and abroad.

                                       New Credit Card Rules
                                         From: www.daveramsey.com

It took an act of Congress last year to make some changes to the ways credit card companies do
business, but the time is finally here. The changes stemming from the Credit CARD Act of 2009 will go
into effect in February.

Some of the new rules and laws that plastic companies must abide by include:

      Not giving credit cards to people under age 21 unless they can prove they have the means to pay
       their debt, or a parent or guardian co-signs on the card. (Warning!)
      Customers must be more than 60 days behind on a payment before their interest rate can
       increase. If that happens and the customer makes the minimum payment on time for six months,
       the old rate must be restored.
      Consumers must be given notice 45 days in advance of their interest rates rising, as well as an
       explanation for why it is happening.

Remember something: Lots of money is at stake here, so don't expect credit card companies to go
quietly. They'll find ways to get around the rules. There may be a limit on how much interest they can
charge, but what if they start creating all sorts of fees that get around the new law? If you save $100
on interest but pay two new fees that total $100, mathematically you are no better off. Thus, the law does
nothing to help you.

If you think that the government has finally delivered the solution and you can rest easy with your credit
cards, you're dead wrong.

Washington isn't going to get you out of credit card debt by changing the way plastic companies charge
you fees. Government rules can't change your behavior. Only you can do that. If you stop using credit
cards and get on a budget, then credit card companies can charge as high a rate as they want—it won't
make a bit of difference to you. You'll sleep much easier at night knowing that you're not paying.

Sources: Associated Press, MSNBC

     North Carolina Consumers Have the Right to Obtain a Security Freeze
                            From: http://www.experian.com/consumer/help/states/nc.html

Consumers in North Carolina have the right to place a ―security freeze‖ on their credit reports, which will
prohibit us from releasing any information in their credit reports without their express authorization,
except to those with whom the consumer has an existing account or a collection agency acting on behalf
of the existing account, for purposes of reviewing (account maintenance, monitoring, credit line increases
and account upgrades and enhancements) or collecting the account. If you place a security freeze on your
credit report, your information also may be used for the purposes of prescreening as provided for by the
federal Fair Credit Reporting Act, even if a security freeze is on the report. A security freeze is designed
to prevent credit, loans, and services from being approved in your name without your consent; however,
using a security freeze may delay, interfere with, or prohibit the timely approval of any subsequent
requests or applications regarding a new loan, credit, mortgage, insurance, government services or
payments, rental housing, employment, investment, license, cellular phone, utilities, digital signature,
Internet credit card transaction, or other services, including an extension of credit at point of sale.

There is no fee for placing a security freeze on a credit report. To request a security freeze, log on to:
www.experian.com/freeze ,

call 1-866-997-0418

or send all of the requested information to

Experian Security Freeze,
P.O. Box 9554,
Allen, TX 75013.

Include your full name, with middle initial and generation, such as JR, SR, II, III, etc.; Social Security
number; date of birth (month, day and year); current address and previous addresses for the past two
years. In addition, enclose one copy of a government issued identification card, such as a driver‘s license,
state or military ID card, etc., and one copy of a utility bill, bank or insurance statement, etc. Make sure
that each copy is legible (enlarge if necessary), displays your name and current mailing address, and the
date of issue (statement dates must be recent). We are unable to accept credit card statements, voided
checks, lease agreements, magazine subscriptions or postal service forwarding orders as proof. To protect
your personal identification information, Experian does not return correspondence sent to us. Copies of
any documents should be sent, and you should always retain your original documents. We will send you a
confirmation notice once the security freeze has been added, and you will be given a personal
identification number (PIN) that will be required in order to remove the freeze temporarily (in order to
apply for credit or for any transaction that requires that another party access your personal credit report)
or permanently.

To request a security freeze with Equifax, log on to:

call 1-800-685-1111

or mail your request to

Equifax Security Freeze,
P.O. Box 105788,
Atlanta, Georgia 30348.

To request a security freeze with TransUnion, log on to

call 1-888-909-8872,

or mail your request to

TransUnion Fraud Victim Assistance,
P.O.Box 6790,
Fullerton, CA 92834.

You may also contact the North Carolina Attorney General‘s Office by logging on to

or by calling toll free within North Carolina at 1-877 5 NO SCAM (1-877-566-7226), at 919-716-6000
from outside of North Carolina, or at 919-716-0058 for Spanish speakers.

You may also submit your request in writing to

Attorney General‘s Office
9001 Mail Service Center,
Raleigh, NC 27699-9001.

To temporarily remove a security freeze for a period of time in order to apply for credit or for any
transaction that requires that another party access your personal credit report, log on to

or call 1 888 EXPERIAN (1-888-397-3742),

then enter your identification information and PIN. There is no fee for temporarily removing a security
freeze. To temporarily remove a security freeze for a specific party, provide your PIN to the party you
wish to grant access to your report.

To permanently remove a security freeze, log on to

or call 1 888 EXPERIAN (1-888-397-3742).

You also may write to us and provide all your identification information and PIN. If you write to us,
always include a copy of your personal identification information and proof of your address as specified
in this letter. There is no fee for permanently removing a security freeze. Mail the requested information
and payment to the address above.

The rights of North Carolina consumers to place a "security freeze" on their credit report pursuant to
North Carolina law are provided at http://www.experian.com/consumer/help/report/fcra_nc.html
                                  Keeping Intensity During Step 3
When you get out of debt and that rush of relief hits you, it's a feeling like no other. You finally have a
sense of peace about your money and can cruise right through Step 3.

Or can you? You may get into a groove while paying off your debt, but once you're debt-free, new
issues can eat away at your intensity. It's important to keep up the momentum that got you where you

So what are some of the things that may come up as you hit Step 3?

Delayed Expenses
The first major reality check comes when you realize that you may have some expenses to catch up on.
During Baby Step 2, we become experts at finding ways to delay expenses with quick fixes. When you
start to plan for Baby Step 3, you become aware of the expenses that are still hanging out there, and
some of them have become urgent.

Delayed Sinking Funds
Perhaps you didn't need to replace your car while working your debt snowball, but it is now on its last
legs. It is important during Baby Step 3 to keep up the gazelle intensity, but finding the balance
between planning for expenses and funding the full emergency fund can be a challenge.

The Never-ending Baby Step 3
Murphy does not take your plans into consideration during Step 3. You may be making excellent
progress on the emergency fund when Murphy pays a visit. It can be de-motivating to fund and re-fund
the emergency fund.

Gazelle Intensity
You just finished Step 2 and are doing well, but what happens when your target changes? Gazelle
intensity is different in Step 3 because the stress of debt has been removed. This opens the door for
justifying expenses. "I'm debt-free. What's $5 on a Starbucks?" Saying no to yourself can be more
difficult when the cheetah is off your back.

Once you are debt-free, it should be much easier to sock money away in a simple money market
account for a rainy day. Keep up your intensity for just a few short months and finish off that third

                                   Some Questions and Answers
                              From the Dave Ramsey Show – www.daveramsey.com

QUESTION: Santo‘s sister-in-law got scammed in a car financing deal and can‘t afford to make the
payments on the vehicle. What can he do to help her out?

ANSWER: Since the car is worth half of what she still owes, selling the car and getting a loan for the rest
of the debt is probably your best bet. Her credit is trashed though, so this probably isn‘t possible.

You should go with her to the finance company and see if they will settle with her instead of re-
possessing the vehicle.

QUESTION: Cindy asks what Dave thinks of zero percent car loans. Dave thinks of them the same way
as every other kind of car loan, which is not good.

ANSWER: A new car loses 60% of its value in the first 4 years. A $28,000 automobile will turn into
$11,000 in 4 years. That‘s roughly $100 a week. I don‘t think that‘s zero percent. You‘re not being
charged an interest rate on your loan, but when you have bought a car you can‘t afford, then it‘s not zero
percent because the car goes down in value like a rock. It‘s the largest thing we buy that goes down in

A zero percent car loan tempts people to buy a car that they shouldn‘t buy because they don‘t have the
money. Pay cash for the car and don‘t buy a new car unless you have a $1 million net worth.

QUESTION: Mario is a new doctor and has a 2001 car with some dents in it and high mileage. Should he
get over being self conscious about parking it in the doctor‘s parking lot, since he‘s a doctor? He‘s heard
how important image is, but he likes not having a car loan payment.

ANSWER: I wouldn‘t have an auto loan. I would walk before I‘d have an automobile loan. I‘d ride a
bike before I had an auto loan payment. You should get over it and not worry about what other people
think; you should do what‘s smart for you.

As a new doctor, I‘m going to guess that you have a big pile of student loans that you need to work
through before you start buying expensive cars. This sounds like a $700 car. Could you afford to pay cash
for a $3,000 car? Sure, but you don‘t need a $145,000 Mercedes in the parking lot to prove you‘re a
doctor. You‘re a doctor … you‘re going to make it.

QUESTION: Lauren wants to know how to raise her daughter to know that Christmas gifts are not free-

ANSWER: As soon as she‘s old enough, begin to discuss what Christmas is about, and it‘s not about her
being a consumer of every item at Toys ‗R Them. Christmas is a spiritual holiday. First and foremost, it‘s
celebrating the birth of Christ. That‘s really what we need to talk about a lot. Christmas is about giving,
not receiving.

Dear Credit Shark,

CONGRATULATIONS!!!! Your credit company has been chosen, out of all those in your area, to receive our
special ―Send us junk mail and get it back at your expense‖ deal.

I know this is not what you expected when you opened this envelope, but I did not expect your garbage when I
opened my mailbox either. I considered sending the following
    1. One chain link, symbolizing the people you have enslaved
    2. One lollipop, symbolizing the suckers who use your credit cards every day
    3. One miniature American flag, representing the members of congress you bought to pass recent legislation
    4. One brand-new, stylish BRICK…representing the homes you have wrecked!

Many people on your mailing lists listen to The Dave Ramsey Show, so we are sending you the following
suggestions instead:

       Take us off your mailing list!
       Clean up your act, then your guilty conscience will let you sleep at night. No more will you jump at your
        own shadow, suffer night sweats, avoid eye contact with your children, or have terrible nightmares that are
        introduced by your former business partners, which feature three strange ghosts.
       Upon receiving your offer in the mail I was excited to see I would have had the opportunity to pay several
        fees, including the application fee, the acceptance fee, the annual fee, AND the monthly user fee. Seeing
        how you are full of fees, perhaps I can interest you in my $250 unsolicited mail fee!

We, The Dave Ramsey Show listeners hold these truths to be self-evident that all men are created equal, that they
are endowed by their Creator with certain inalienable rights that among these are: Life without credit card debt,
Liberty from ridiculous interest rates, and the pursuit of happiness which will be achieved when you finally get the
message: Reply THIS shark!!!


Devoted to Being Debt-Free

                                         ―The rich rule over the poor, and the borrower is the servant to the lender.‖

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Week 4 Reading Assignment
       How do I Make a Lowball Offer?

     What Kinds of Insurance do I Need?

        The Truth About Life Insurance

     Protecting Your Financial Freedom

Controlling Impulsive and Compulsive Spending

   Term Life Insurance: Where the Value Is

  Guaranteed or Extended Replacement Cost

     Avoid Single-issue Insurance Policies

  Why You Should Have Disability Insurance

                                 How do I Make a Lowball Offer?
                                   From: Dave Ramsey Says - January 4, 2010

Dear Dave,
My husband and I are looking at getting a second vehicle. We found one we like, and it's in great shape,
but they're asking more than we can afford to pay. Do you have anysuggestions on how to make a low
offer without insulting someone?

Dear Angela,
This is a really good question, and I think you're smart to want to stay on the seller's good side. You want
to be classy and diplomatic. Never point out the bad things about an item someone's selling just to drive
down the price. You're liable to blow the whole deal right off the bat if you insult their merchandise or
insinuate the price is unfair.

What if you try something like this? Tell them it's a fine vehicle, and their price is fair, but the amount
they're asking is outside your budget. Let them know that you want to work out a deal, and in order for it
to fit into your lifestyle, you can only pay a certain amount. You might throw in that a lot of people are
selling things right now because of the economy, and you're just looking for the best deal.

Who knows? Maybe that and letting them know you're standing there with money in hand will help swing
this thing in your favor!

                               What Kinds of Insurance Do I Need?

You know you should have a comprehensive, cost-effective network of coverage, but what you need and
how much can be confusing. Here are answers to 15 of the most commonly asked questions about

1. What sorts of insurance do I need?

Most people need to be concerned with insuring four areas: their possessions, their life, their health and
their finances.

2. When you're talking about possessions, does that mean homeowners insurance is the most

Probably, because a house is likely to be the single biggest investment most of us make. The rule of
thumb with homeowners insurance is not to skimp. If you can, pay extra for guaranteed-replacement
coverage, which mandates that the insurer will replace your home if it is destroyed, regardless of the cost.
If you instead specify a dollar amount of coverage, and it's not enough, you could end up paying the

3. Once I have guaranteed-replacement coverage for my home, I'm all set, right?

Well, it's important to know what your homeowners insurance covers and what it doesn't. For example,
particularly pricey items such as big-screen televisions and fancy stereo equipment are often excluded
from policies or, at the least, inadequately covered. The same goes for antiques, collectibles, expensive
jewelry and furs. Ask for riders that specifically cover those items.

Additionally, homeowners insurance does not cover flood damage. Go to your town or municipal office to
see if your home is in a flood plain. If so, these private insurers participate in the federal government's
National Flood Insurance Program. Likewise, seek out earthquake insurance if you live in a vulnerable

4. I have a home office. Do I have any special insurance needs?

Oh, yes. A great deal of home-office equipment, including computers, fax machines and copy machines,
is excluded from most conventional homeowners policies. You have to obtain separate insurance to cover
them. If you see clients in your home office, insurance becomes particularly important: You will need
liability insurance as well. Check with your insurance agent to make certain your bases are covered.

5. Does homeowners insurance cover me if, say, someone slips on my front steps, breaks a leg and
sues me?

Not completely. Homeowners policies -- and, for that matter, renters policies -- have liability limits. One
option is an umbrella policy. This adds additional liability coverage, upward of $1 million, relatively
cheaply (prices vary considerably from state to state). It also gives you additional liability coverage for
your car.
6. Is car insurance an absolute must?

Absolutely. Every state requires that drivers have some sort of automobile insurance in place. Even if they
didn't, it would be sheer madness to drive one inch without some form of protection. Slam into someone
and wreck another car or kill someone, without the protection of auto insurance, and your financial life
could be ruined.

7. Why is auto insurance so expensive, and how can I hold down the cost?

The biggest bite comes from liability protection, which is composed of bodily injury protection and
property protection. This is one element of auto insurance you shouldn't shortchange. Look for coverage
of at least $100,000 per person, another $100,000 for property and $300,000 per accident. If you can
swing it, add uninsured motorist coverage, which protects you if you're in an accident involving a driver
with no insurance.

To make this more affordable, consider raising your deductibles (that portion of the expense you have to
pay before your coverage kicks in). Pushing up deductibles to $500 or even higher can significantly cut
your premiums. Consider eliminating collision coverage, which covers damage to your car. That's
probably not wise if your car is new, but give it some thought if your car has a few years on it and driving
around with a ding or two is no big deal.

Other ways to cut costs: Drive safely (drivers with good records get better deals); insure every car you
own with the same company (packages that cover multiple vehicles often mean lower premiums); don't
smoke (statistics show that smokers have more accidents than nonsmokers); and, if you're still in school
and pulling down good grades, let your insurer know it (good marks sometimes cut premiums). For more
help, see "Find a great price on auto insurance."

8. What about life insurance? Do I have to have that?

Does anyone depend on you financially? In its most basic form, life insurance covers a person's income. If
no spouse, child or parent is depending on your income, then life insurance is optional. If you're married,
or there is someone whose well-being depends on what you make for a living, life insurance can prove an
essential form of protection.

There is one wrinkle that goes against the maxim "no income, no insurance." If one spouse works and the
other stays home with kids, consider taking out insurance on the parent at home. Should he or she die, the
death benefit could cover the hefty expense of child care.

9. How can I figure out how much life insurance I need?

About 10 times your household income.

10. What sort of life insurance should I consider?

Term life insurance is best for most people. It's the cheapest and simplest insurance you can get. You pay
the premium and you're insured. It's particularly effective if you follow the time-honored wisdom of
investing the difference between what you pay for term insurance and what you would pay for "whole

life" or cash-value insurance. If things work out, your investment program will leave you with a large
cache of cash.

11. So I should never buy anything but term life insurance?

It's not quite that cut-and-dried. If you doubt you'll be able to invest the difference, cash-value programs
are a form of forced savings. Some are tied to mutual funds that can offer reasonable rates of return. And,
because life-insurance death benefits are exempt from taxes, they can prove an effective strategy for
passing along assets to your heirs. The downside to most cash-value plans is that they're more expensive
than term insurance, and you have to hold on to them for a set number of years so you're not hit with
heavy "early surrender" charges.

12. Health insurance is something I can't do without, right?

Correct. According to the most recent Census data, nearly 46 million Americans lack health insurance.
Make sure you're not one of them. Many employers offer health insurance to employees at group rates.
Plans boil down to two options: managed care and fee for service

With managed care (HMOs, PPOs and the like), the employee is responsible for a co-payment, generally
between $10 and $30, for doctor visits and other services. In exchange, the program specifies certain
physicians from which you may select. Managed-care programs are infamous for making you wait days
and even weeks before getting in to see someone.

Fee for service, on the other hand, carries more expensive premiums than managed care. The major
advantage is that you can generally go to any doctor you want. Fee-for-service policies usually pay 80%
of patient expenses after deductibles, and you are responsible for the remaining 20%. Like other forms of
insurance, you can trim fee-for-service premiums by increasing your deductible.

If you're self-employed, or your employer doesn't offer health coverage, make certain you get something
in place. You can start by searching for quotes online here at MSN Money.

13. What exactly is COBRA?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985. Under COBRA, if you
resign from a job or are terminated for any reason other than "gross misconduct," you can continue to be
covered under your former employer's health care plan for up to 18 months. In many cases, spouses and
dependent children are also eligible. The downside is that the premiums are expensive -- in effect, you're
paying both your and your former employer's share. The idea of COBRA is to remain covered until can
you arrange for some other sort of health insurance.

14. Does health insurance help if I'm sick or injured and laid up for a while?

Partially. Health insurance helps only to pay your medical expenses. Disability insurance is what keeps
income coming in if you can't work for a time. This is one of the more commonly overlooked types of
insurance, and one that most working families really need. It pays you an income if you're incapable of
generating your own for any period of time. Some employers offer it, but in many cases, you'll have to get
it on your own. Look for policies whose waiting periods are no longer than 90 days. This is the time you
have to wait until you start getting disability payments.
15. What about long-term care?

Long-term-care insurance helps pay for nursing care and other like expenses when you get older. That's a
good thing, no doubt about it. But the premiums are expensive and grow as you get older. The average
premium for those younger than 65 is $1,337 per year. Older than 65, it's $2,862, according to the
American Association of Homes and Services for the Aging. So you have to consider whether you can
genuinely afford the increasing premiums.

                                 The Truth About Life Insurance
                                    (from daveramsey.com on 03 Aug 2009)

Myth: Cash value life insurance, like whole life, will help me retire wealthy .
Truth: Cash value life insurance is one of the worst financial products available.

Sadly, over 70% of the life insurance policies sold today are cash value policies. A cash value policy is
an insurance product that packages insurance and savings together. Do not invest money in life
insurance; the returns are horrible. Your insurance person will show you wonderful projections, but none
of these policies perform as projected.

Example of Cash Value

If a 30-year-old man has $100 per month to spend on life insurance and shops the top five cash value
companies, he will find he can purchase an average of $125,000 in insurance for his family. The pitch is
to get a policy that will build up savings for retirement, which is what a cash value policy does. However,
if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only
$7 per month, not $100.

WOW! If he goes with the cash value option, the other $93 per month should be in savings, right? Well,
not really; you see, there are expenses.

Expenses? How much?

All of the $93 per month disappears in commissions and expenses for the first three years. After that, the
return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-
improved variable life policy that includes mutual funds, according to Consumer Federation of America,
Kiplinger's Personal Finance and Fortune magazines. The same mutual funds outside of the policy
average 12%.

The Hidden Catch

Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for
years don't go to your family upon your death. The only benefit paid to your family is the face value of
the policy, the $125,000 in our example.

The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie
jar! At least after three years you would have $3,000, and when you died your family would get your

A Better Plan

If you follow my Total Money Makeover plan, you will begin investing well. Then, when you are 57
years old and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds,
you'll become self-insured. That means when your 20-year term is up, you shouldn't need life insurance
at all – because with no kids to feed, no house payment and $700,000, your spouse will just have to suffer
through if you die without insurance.

Don't do cash value insurance! Buy term and invest the difference.
                                 Protecting Your Financial Freedom
From: http://articles.moneycentral.msn.com/Insurance/AssessYourNeeds/4WaysToProtectYourFinancialFreedom.aspx?page=1

You've made the decision to abandon the corporate world and are about to pull the trigger on your plans
for financial freedom -- or maybe you're still in the dreaming stage. Either way, you're putting your
finances in order, drawing up spending plans and realigning investments for your post-9-to-5 life.

Sounds idyllic, but all of your plans for financial freedom could be scuttled if you don't guard against
catastrophe. Get in a serious car accident, contract a disabling illness or fall off a ladder while cleaning
your gutters, and you could find yourself wiped out.

To protect yourself and your dreams for the future, here are four types of insurance you should at least
consider. Two of these -- health and umbrella liability insurance -- are pretty much no-brainers for most
people. The other two are important but tend to be expensive. Here's what you need to know.

Health insurance: Consider catastrophic coverage

Even if you're young and healthy, health coverage is a must-have. One accident or illness could wipe out
everything you have or land you in bankruptcy court. If your employer doesn't offer health insurance, or if
you're self-employed, catastrophic insurance is one way to protect yourself.
You also should consider it if you're about to retire early. Few companies offer retiree health benefits
anymore, and Medicare doesn't start picking up your medical bills until you're 65.

Catastrophic coverage has high deductibles and low monthly premiums. Most policies make you pay for
the first $1,000 to $5,000 in medical bills, but then cover everything over that up to a limit, typically $1
million to $3 million. Instead of costing $300 to $500 a month for two people in their 30s -- the typical
cost for traditional, lower-deductible plans -- catastrophic policies cost closer to $100 to $200 a month.

The costs increase the older you are, but catastrophic coverage will still be less expensive than the
alternatives. A couple aged 55 could pay more than $1,200 a month for a traditional medical plan, while a
high-deductible plan will cost about $500.

As with most insurance, it pays to shop around. Contact several companies for quotes, or use an
independent insurance agent who can help you comparison shop.

Umbrella liability insurance: Peace of mind

This type of insurance protects you if you are sued or cause damage to someone else. Your homeowners
and auto policies have liability insurance built into them, but the coverage may not be sufficient.
The typical auto policy, for example, has a maximum liability limit of $300,000 per accident, although
your limit could be as low as $15,000 if you bought a bare-bones policy. If you cause an accident that
results in $1 million of medical bills for someone else, you could be sued for the difference.

That's why insurance experts recommend that you have liability insurance equal to at least twice your net
worth, if you're highly paid or seen as a possible lawsuit target (if you're a doctor, a lawyer or any kind of
public figure).

Most auto and homeowners policies have an upper limit of coverage of $500,000, so if you need more
coverage, you'll probably need to buy a personal liability policy. This so-called umbrella policy extends
over your existing coverage like an umbrella, kicking in after your auto or homeowners coverage is

Umbrella policies are one of the best-kept secrets in the insurance world. They're relatively inexpensive,
so insurance agents don't make much of a commission selling them. But for $150 to $300 a year,
depending on where you live, you can get $1 million of coverage -- and peace of mind.

Disability insurance: Replace your income

You may think your biggest asset is your house or your 401k, but actually it's your ability to earn money.
And chances are, you don't have enough protection should you become unable to work for more than a
few weeks.

Your state's workers' compensation fund, for example, usually provides benefits only if you get hurt on
the job. Your employer probably provides some kind of short-term disability coverage, but the checks will
end after three months to a year. If you can't work for longer than that, Social Security may provide some
benefits -- but only if you're so disabled that you can't hold any job.

So unless you don't mind switching from your current career to one flipping burgers or telemarketing, you
probably want to have a long-term disability policy.

Unfortunately, if your employer doesn't offer it, you may find that a long-term disability policy is
expensive or tough to get, said Raymond Parry, an account executive with James P. Bennett & Co. in
Santa Monica, Calif. A 35-year-old white-collar worker needing a $5,000 monthly benefit would pay at
least $2,500 a year for an individual policy, and that's assuming she's in perfect health, Parry said. Some
people who try to get policies on their own, Parry said, find they don't meet the disability companies' strict
underwriting criteria.

It's much easier to get a policy through your employer, if that's an option. About a third of the nation's
workers have access to long-term disability coverage through their jobs, U.S. Department of Labor
statistics show (.pdf file). Either their company pays for the insurance, or the worker can buy it at a
relatively reasonable group rate. The larger the company, the more likely it is to provide this coverage,
said Joseph Luchok, a spokesman for the Health Insurance Association of America in Washington, D.C.

If your employer doesn't offer the coverage, or if you're self-employed, your next best bet is to see
whether you can buy a policy through one of the professional or trade organizations to which you belong.
If not, you can try to form your own group of at least 10 people to qualify for a discounted rate, Parry
said. The insurance agent said he has formed such groups for small-business owners who didn't have
enough employees to qualify for group rates on their own.

If your only option is buying a policy on your own, make sure to get enough coverage. Most insurers
won't provide benefits that replace more than 60% to 70% of your income, but opt for the highest
percentage you can get. You can buy policies that cover you for the rest of your life, but they're often
prohibitively expensive; look for one that pays benefits until age 65.

You'll need to go through an agent or broker, so pick one who does a lot of this business and keeps up to
date with the insurers' ever-changing policies.

Long-term-care insurance: Safeguard your legacy

Some financial planners say long-term-care insurance can both preserve your assets and ensure that you
receive high-quality care. Others say you're better off skipping these policies and using the money to build
your retirement funds so you can pay for care directly.

That debate won't be solved here. But here are some things to think about:

First, if you're younger than 50 or have more than $1 million in assets, you probably don't need to worry
about this coverage. If you're older than 50 and have $100,000 or more in assets, however, you might
want to at least consider it.

Long-term-care insurance covers the costs of serious illness that aren't picked up by regular health
insurance or Medicare, the government health program for people over 65. If you can't properly feed,
clothe or bathe yourself and need an aide to help you, long-term-care insurance pays the bill.

Long-term care can be expensive: Figure at least $60,000 a year for nursing-home care, and more for care
provided at home. Most people need long-term care for two years or less, although 8% of people spend
five years or more needing help, according to figures from the Congressional Budget Office.

People who have $1 million or more of assets probably can pay for their own long-term care, although
some people buy the policies anyway to ensure that their care doesn't eat up their children's inheritance.
Preserving an inheritance is also the reason some people buy policies for their parents.

At the other end of the economic spectrum are people who are simply too poor to pay for coverage, which
typically costs $500 to $2,000 a year. If the premiums cost more than 7% of your gross income, says
long-term-care expert Bonnie Burns, you shouldn't even bother with this coverage. If you're truly
indigent, you'll most likely end up qualifying for Medicaid, the government program that pays for
nursing-home care for the poor.

Experts disagree about when to buy the policies as well. You'll pay less for coverage if you buy it while
you're young (age 40 or so -- you usually can't get a policy at a younger age). But the savings may be
moot because you're likely to pay for the policy for many more years before you actually need it.

Buy the policy too late -- after 65, say -- and you'll pay a lot more. Monthly premiums for a 65-year-old
can be two to three times higher than the same policy for a 50-year-old. Although recommendations vary,
the best time to buy long-term-care insurance seems to be between age 50 and 60.

If you're interested in buying a policy, be prepared to do your research. Start by asking your state
Department of Insurance for its buyers guide to long-term care insurance. Most states produce one, Burns
said. The National Association of Insurance Commissioners also produces a "Shopper's Guide to Long-
Term-Care Insurance," which you can order for free.

You might also be able to buy a policy through work. Only about one in eight employees has the option
now, but that is expected to grow "due to an aging population and baby boomers who will be increasingly
likely to take care of aging parents," said EBRI analyst Ken McDonnell.

                        Controlling Impulsive and Compulsive Spending

We are daily bombarded by advertising messages that attempt to entice consumers to indulge themselves
with whatever product is being sold.

Advertisers play on the insecurities of consumers and tell them infinite ways their products will satisfy
needs and dissatisfactions. Consumers in turn spend with a vengeance.

Impulsive spending

Although self-discipline is the best way to control spending, too many people are caught in a cycle of
impulsive spending that seems to have a life of its own, beyond the limits of self-discipline.

Tahira K. Hira, a professor of family and consumer science at Iowa State University says, ―Low self-
esteem appears to be related to impulsive spending. Couple low-self esteem with lack of knowledge of
current personal financial status, combined with other savings barriers such as procrastination, stress and
insecurity, and the result is a greater focus on paying for needs today and forgetting those for
tomorrow….The key is getting a grasp of cash-flow management. Those who don‘t know extend their
income with credit cards.‖

Impulsive buyers buy on a whim, make unplanned purchases, usually lack self-control in buying
situations, and lack clear priorities in spending, which results in overspending, unnecessary additional
debt, unused articles, and family arguments.

Most impulsive spenders sabotage their own prosperity with the ―I want it now syndrome,‖ which is
characterized by spending beyond their incomes. This in turn leads to persistent fear, unremitting debt,
and depression and feeds into a downward cycle of worry and low self-esteem…. the instant gratification
of impulsive spending…deepening debts…more worry…more spending…

The best way to overcome short-term buying impulsiveness is to (1) leave the presence of the item; (2)
price the item in three other places; (3) keep tight control on the use of credit cards; (4) buy only what is
needed and practical; and (5) have spending priorities.

Discipline is the key to controlling impulse buying, long term. ―By what a man is overcome, by this he is
enslaved‖ (2 Peter 2:19).

Before buying on impulse, list the item on an Impulse List, talk about the item with your spouse, obtain
comparison prices, and wait seven days before purchasing the item.

Most impulse purchases can be eliminated by this discipline.

Compulsive spending

When people do not feel confident in themselves and have very low self-esteem, they may look to factors
outside themselves as sources of value.

Compulsive spending is a means by which people fill the vacuum in the heart that should be filled with a
sense of personal acceptance.
Listed below are 10 signs and symptoms that characterize compulsive spending.

   1. Shopping or spending money as a result of being disappointed, angry, or depressed.
   2. Having emotional distress or chaos in personal and family lives because of shopping or spending
   3. Having arguments with others regarding shopping or spending habits.
   4. Feeling lost without credit cards.
   5. Buying items on credit that would not be bought with cash.
   6. Spending money feels like a reckless or forbidden act.
   7. Feeling guilty, ashamed, embarrassed, or confused after shopping or spending money.
   8. Lying to others, especially the spouse, about what was bought or how much money was spent.
   9. Juggling accounts and bills to accommodate spending.
   10. Feeling of powerlessness and helplessness to overcome the compulsion to spend.

Although genuine freedom from compulsive spending is a fruit of the Spirit in that God offers the power
to have self-control through His Son, Jesus Christ (see Romans 6 and Colossians 3), there are some viable
steps that can be taken to help correct the problem.

       o     The first thing is to understand the nature of the problem: the emotional needs and
         personality traits that have given rise to compulsion.
       o     Second, develop and implement practical applications that include balancing outgo with
         income (do not spend unless there is money to spend), budgeting, setting goals, and getting
         quality financial counseling.
       o     Third, eliminate credit buying. Compulsive spending is many times an addiction to credit
         cards. It generally takes 30 days to break someone from any addiction such as drugs, alcohol,
         and so on. Credit cards can be included with this group. Therefore, either destroy the credit
         cards, place them in a drawer out of sight, or give them to someone for safekeeping, and do not
         use them for 30 days. Within those 30 days it will become apparent that life goes on without
         the need for credit cards.

The U.S. Commerce Department says that U.S. personal-savings rate hit an all-time low of -0.2 percent in
September of 2000 and as of January 2005, savings has not returned to a positive level.

That means that Americans are spending more than they earn, which leaves less than nothing for saving.

Since impulsive and compulsive spending patterns can often be justified or rationalized in our current
society in which these unhealthy spending cycles are encouraged rather than discouraged, savings will
most likely continue to decline and debt will continue to increase until self-discipline and self-control are
established and the impulsive/compulsive spending precedent is brought under control.

                            Term Life Insurance: Where the Value Is
        From: http://www.smartmoney.com/personal-finance/insurance/term-or-whole-life-8011/#ixzz0fTVM434g

FOR MOST PEOPLE, the right type of life insurance can be summed up in a single word: term. But
before we explain why, it's important to understand the differences between the most common types of
insurance available. Our glossary can help with that, and decipher some of the more common insurance

The basic difference between term and whole life insurance is this: A term policy is life coverage only.
On the death of the insured it pays the face amount of the policy to the named beneficiary. You can buy
term for periods of one year to 30 years. Whole life insurance, on the other hand, combines a term policy
with an investment component. The investment could be in bonds and money-market instruments or
stocks. The policy builds cash value that you can borrow against. The three most common types of whole
life insurance are traditional whole life policies, universal and variable. With both whole life and term,
you can lock in the same monthly payment over the life of the policy.

Whole life insurance is expensive: You're paying not only for insurance but also for the investment
portion. That extra cost might almost be worth it if these policies were a good investment vehicle. But
usually they aren't. Insurance agents like to call these policies retirement plans, emphasizing the "forced
savings" inherent in forking over the premiums each month "for retirement."

Leaving aside the fact that there are many better ways to save for retirement, these policies come with
high fees and commissions, which sometimes lop off as much as three percentage points from the annual
return. On top of that, there are up-front (but hidden) commissions that are typically 100% of your first
year's premium. Worse, it's often impossible to tell what the return on the investment will be, and how
much of what you pay in goes toward the insurance and how much toward the investment.

Premiums for term insurance are downright cheap for people in good health up to about age 50. After that
age, premiums start to get progressively more expensive. The same holds true for whole life policies,
though people who need coverage starting in their 60s and beyond may have no alternative but to buy
whole life. Most companies simply won't sell term policies to people over about age 65.

To get a real sense of the value of term, let's compare a term policy and a universal life policy. Say a 40-
year-old nonsmoking male has a choice between a $250,000 Met Life universal policy with a $3,000
annual premium and a same amount of renewable term coverage with a 20-year fixed premium of $350.
At the end of one year, the universal policy, assuming it paid 5.7% per year, tax-deferred, would have a
cash value of exactly zero (cash value is the amount you would get back if you canceled the policy). But
say he had instead invested $2,650 (the difference between $3,000 and $350) in a no-load mutual fund
that averaged a total return of 10% annually. At the end of the first year, he'd have $2,841, accounting for
taxes on the earnings at a 28% rate. At the end of 10 years, he would have accumulated more than
$46,000 in after-tax savings in the mutual fund. Over the same period, the cash value of the policy would
have climbed only to $31,819.

Read more: http://www.smartmoney.com/personal-finance/insurance/term-or-whole-life-

                         Guaranteed or Extended Replacement Cost
                From: http://www.freeinsuranceadvice.com/guaranteed-or-extended-replacement-cost

Guaranteed or Extended Replacement Cost is a type of home insurance policy that offers the highest
level of coverage. This policy will pay whatever it costs to put your home back together as it was before
the covered disaster--regardless of the limits listed in your policy.

A Guaranteed Replacement Cost policy protects you from sudden increases in construction costs due
to a shortage of building materials after a massive disaster or other unexpected situations.

Although it will get your house back to its original state, it generally won't include the cost of
upgrading your house to current building codes. If this is a priority, you should get an add-on (they call
this an endorsement) to your policy called Ordinance or Law to help pay for these additional costs.

If you own an older home, the cost of rebuilding it to its original glory prior to a disaster may be
prohibitive. As a result a guaranteed replacement cost policy may not be available to you.

In this case you might want to opt for an Extended Replacement Cost policy. Although it won't be as
unlimited as a guaranteed replacement cost policy, you will generally get 20 to 25 percent more than
the limit of a standard policy.

For example, if you took out a policy for $200,000, you could get up to an extra $40,000 or $45,000 of
coverage above the limit.

Since the insurance company will end up paying more out to you in the event of a covered disaster, you
will pay a higher premium for extended replacement cost on a homeowners insurance policy. These
types of policies offer such great protection that some insurance companies don't even offer them.

                               Avoid Single-issue Insurance Policies
               (Some xceprts from http://clarkhoward.com/liveweb/shownotes/category/9/48/ and

Single-issue insurance policies are considered a rip-off by some consumer advocates. You should avoid
them. Examples of single-issue policies include mortgage life insurance, Credit life and disability, cancer
insurance and accident insurance.

Mortgage Life Insurance
Mortgage life insurance, meanwhile, is also garbage. The premiums are about 10 times what life
insurance should cost. The worst part of it all is that you're insuring the mortgage company, not yourself;
mortgage life insurance pays off the lender in the event of your death! But your survivors likely will have
more pressing financial needs at that time. That's why plain vanilla term life insurance would suffice in
such an instance.

Credit Life and Disability Insurance
Mortgage life‘s cousin is credit life insurance, and you are pushed to get this when you buy a car or other
big purchase. These are sold as protection for you, but really they provide protection for the bank. So, it‘s
essentially like putting lipstick on a pig. Maybe it looks better, but it‘s still a pig. With this type of
insurance, it‘s important to understand that the beneficiary is the bank. And the bank is asking you to pay
premiums for its own protection! These policies guarantee that in case of illness or disability, the bank
will continue to receive MINIMUM payments on your debts (while your account continues to accumulate
interest), or in the case of death, the bank could collect for your entire outstanding loan (up to a certain

Most people are unaware of the standard practice of many banks to include credit life and disability
insurance as part of personal loans. Often this insurance is treated as part of your loan obligation, which
means that you‘re paying interest on it to boot! Your banker will seldom disclose this hidden cost, so
unless you‘re savvy on the scheme, you‘ll be enrolled in the program by default.

Plus, the bank receives up to 40% commission on reselling you this insurance policy simply for signing
you up! Other than some kind of peace of mind, there really isn‘t much in it for you. What‘s worse, as a
hook, these policies are often pushed as free for a period of time, but cancellation is not always that easy.
It can be difficult to find contact information, and since the insurance company is not your bank, your
bank‘s customer service may not be able to help you.

There are much better ways to protect yourself against accidental death, illness or disability that will
benefit you and your family. A term life policy obtained straight from your insurance agent is certainly
much less costly, and one policy can cover all your debt obligations, whereas what the banks offer cover
only each credit card, credit line or loan individually. And, if your coverage exceeds your unpaid balances
in case of death your family / beneficiaries will receive what remains. There are also better disability
insurance plans.

Cancer Insurance
What about cancer insurance? If you get cancer, you need health insurance and term life insurance, and
that‘s it. And, if you can‘t work and need replacement of your income, you want disability insurance.
Homeowners or renters, auto, identity theft and perhaps long-term care are other types of insurance you
should have. All the others you can chuck. In the case of cancer insurance, insurers use the power of the
C-word to sell the policy. Years ago, people wouldn't even utter the word "cancer." They would just say
that you had a malignant tumor, because a diagnosis was often considered fatal. But today, many people
survive cancer. Insurers, however, have learned that they can still capitalize on people's fear of the

Accidental Death
Accident policies are a tremendous rip-off. The reality is that general insurance -- of the life, disability
and/or health variety -- represents a better choice.

Variable Annuities
Another popular item is the variable annuity. It‘s almost never a good idea to buy one of these because
there are monstrous commissions.

Other Types of Insurance to Avoid
What about your car? You need the standard automobile insurance required by the state, but you don‘t
need rental insurance when renting a car. If you get in an accident, you‘ll owe regardless of whether you
have insurance. And usually your credit cards or auto insurance company has some type of temporary
rental car coverage. PEC or ―personal effects coverage,‖ which covers things stolen out of your rental car,
is not necessary either.

Finally, extended warranties on electronics and other purchases are another example of single-issue
insurance policies that you should avoid. Consumer Reports says that 1 in 5 laptops will fail in the first 5
years. Yet, on the bright side, 80% will go for 5 years without a problem.

Another reason why extended warranties don't make sense is that the laptop or HDTV you buy today will
be obsolete in 24 months. You shouldn't insure rapidly depreciating commodities.

                         Why You Should Have Disability Insurance
              (Some excerpts from http://clarkhoward.com/liveweb/shownotes/category/9/48/ and

People are much more likely to have life insurance than disability insurance, which pays you in the event
that you can‘t work. We‘re three times more likely to get injured on the job than to die during our key
working years. It‘s offered from employers, but it‘s sometimes not such a good idea to get insurance from
your employer. Because of an obscure federal law called ERISA, states can‘t help you if you get
insurance from an employer. If you get cheated on disability coverage from an employer, for example, the
government can‘t help you. Therefore, insurers know they can collect premiums and not pay on claims.
So, you should buy your own disability policy. That way, you‘re protected without question. Usually 65
to 75 percent of your income is recommended. And don't get a policy that uses the Social Security
Administration's definition of an illness. It's very strict. Keep in mind that disability insurance is not
cheap, however. So, you may have to trim how much you get. But if you‘re getting it from a large
employer now, you might get burned when the chips are down. But, then again, you might not, so check
with your employer‘s personnel department on exactly what the company‘s insurance covers and under
what circumstances.

Assess your personal disability quotient at WhatsMyPDQ.org. It will predict the likelihood of you
needing to use disability insurance during your working lifetime.

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  Week 5 Reading Assignment
               The Power of Compounding
         Dave Ramsey’s Investment Philosophy
             The Wisdom of Great Investors
     Qualified and Non-Qualified Retirement Plans
            Your Retirement Savings Options
                 Traditional vs Roth IRA
                     College Funding
                 Student Loan Backlash
                  The Decade in Review
       Monday Market vs. Certificate of Deposit
                  Viaticals: Watch Out!
               How to Set Investing Goals
     Social Security: Don’t Rely on the Government
 Things You Should and Shouldn’t Do Once You Retire
    Three Steps to Wealth Building for Young Adults
Important Update from Dave Ramsey About the Economy
            Plan Now for Your Golden Years
       Three Retirement Tips for Late Beginners
                      Roth IRA 101
      How to Survive the Roller Coaster Economy
                     Proper Investing
             The Stock Market Will Rebound
   Retirement Planning: Yourself or a Professional?
  Three Mistakes That Can Sabotage Your Retirement
                  Thoughts on Investing
                   Millionaire Secrets
              Alleviate the Risk of Investing
                  Keep at It and Cash In

                                   The Power of Compounding
To reap the most benefit from your investments, you need to start saving now. If you're patient and
disciplined, your money can work for you to produce astounding results over time

The key is the power of compounding, the snowball effect that happens when your earnings generate even
more earnings. You receive interest not only on your original investments, but also on any interest,
dividends, and capital gains that accumulate—so your money can grow faster and faster as the years roll
on. This is particularly evident in retirement accounts, where principal is allowed to grow for years tax-
deferred or even tax-free.

Here's an example: Let's say you invest a single lump sum of $10,000 that earns 7% per year. If you took
that return as cash and spent it, your principal would, of course, remain $10,000. But if you faithfully
reinvested that 7% every year, your money would grow to more than $75,000 after 30 years. And as the
accompanying graph shows, compounding for ten additional years would almost double that amount.

This hypothetical example assumes two initial $10,000 investments that each earn 7% ($700) annually.
The lower line shows that the investment value remains constant when the $700 is taken as cash each
year. The upper line shows the value when the same earnings are reinvested annually. As the reinvested
earnings generate their own annual returns at 7%, the accumulated value accelerates toward the end of the
40-year period. Taxes are not included in the calculations. This graph does not represent the returns on
any particular investment.

                              Dave Ramsey’s Investing Philosophy

                   From: http://www.daveramsey.com/media/pdf/daves_investment_philosophy.pdf

Want to know how Dave invests his money? Here‘s your chance to find out! This guide is intended to
help you understand what Dave has to say when it comes to the nuts and bolts of investing.

If you would like in-depth help to invest your money, contact your investing Endorsed Local Provider.
Our investing ELPs are financial advisors that agree to help you invest the way Dave teaches. ELPs do
not work for Dave but they are honest professionals and will make sure you understand your investments.

Special Note: Even though many people value Dave’s advice, you should not simply do what Dave does
just because he’s Dave Ramsey. If you get the help of a financial advisor, even an ELP, you are
responsible for making your own decisions. Never take a blind faith mentality when it comes to investing.

Dave's Investment Philosophy (printer-friendly) Dave's Investing Philosophy

Baby Steps: Don’t start investing prior to completing Baby Step 3.

   1.   $1,000 to start an emergency fund.
   2.   Pay off all debt using the debt snowball.
   3.   3-6 months of expenses in savings.
   4.   Invest 15% of household income into Roth IRAs and pre-tax retirement.
   5.   College funding for children.
   6.   Pay off home early.
   7.   Build wealth and give! Continue to invest in mutual funds and real estate.

Investing For Those Just Getting Started:

   1. Be sure you have completed the first 3 Baby Steps.
   2. Begin by doing pre-tax savings in (401k, 403b, TSP, Traditional IRA) and tax-free savings (Roth
      IRA, Roth 401k)

NOTE: If you receive a match in your (401k, 403b, TSP), invest here first up to the match. Then, fully
fund a Roth IRA for you (and your spouse, if married). Then, come back to the (401k, 403b, TSP).
If you are still on Baby Steps 1-3, be patient; put off investing for now. Avoiding a crisis with a fully
funded emergency fund and paying off high-interest debts is a fantastic investment!

 Mutual Funds:
25% into each of these four types of funds:

       Growth
       Growth & Income
       Aggressive Growth
       International
A shares (front end load); funds that are at least 5 years old or older; solid track record of acceptable
returns within fund category.
*If risk tolerance is low, put less than 25% in aggressive growth or consider adding a ―Balanced‖ fund to
the four types of funds Dave suggests.

Single Stocks:
I do not own single stocks and do not suggest single stocks as part of your investment plan. Single stock
investors over long periods of time don‘t consistently generate returns as high as mutual funds do. If you
really want to own a stock for some reason (company stock, for fun, etc.), limit single stocks to no more
than 10% of your investment portfolio.

Certificates of Deposit: (CDs)
I suggest using CDs only for savings (for a purchase, taxes if you own a business, etc.); not for long term
investing. When using CDs, be aware of fine print for early withdrawals. CDs carry a low rate of return.
As an investor, to get ahead you must earn a high enough rate of return to outpace inflation (3% to 4% per
year) and to pay taxes on the gains if not inside a retirement account. Most investors need to average a
minimum of 6% per year over time to do these two things.

I do not own any bonds and do not suggest them as part of your investment plan. Bonds carry the
incorrect stereotype that they are safer with a slightly lower rate of return than equities. Not true. Single
bonds can be very volatile and can actually go down significantly in value. Bond mutual funds can at
least be tracked for historical returns, but do not offer the returns equity mutual funds do.

Fixed Annuities:
I do not own any fixed annuities and do not suggest them as part of your investment plan.      Simply stay
away from these!

Variable Annuities:
Variable Annuities (VA‘s) cause more confusion than any other financial product. Here are some basics
about VA‘s
What is it?

      VA‘s are a savings contract with a life insurance company.
      They offer tax deferred growth on an after tax investment.
      They offer beneficiary designation, which allows the account to be transferred to a beneficiary
       outside of probate court.
      VA‘s carry penalties if the contract is broken prior to the agreed upon time period, usually a
       declining surrender charge that lasts from six to eleven years.
      10% IRS penalty for withdrawing prior to age 59.5.
      VA‘s offer many bells and whistles, such as guarantees of principal, life insurance, etc.
      VA fees vary widely.

Dave’s strong suggestions when considering VA’s:

      Only consider VA's when you reach Baby Step 7. In other words, you're debt free including your
       home and all other tax deferred options have been used.
      VA‘s can be useful investment tools because they allow your investments to grow tax deferred.
      When purchasing VA‘s understand the fees, surrender period, and any riders or options you
      When purchasing VA‘s, stay with the four types of mutual funds I suggest inside the VA.

High income earners:

      If a person earns too much to do a Roth IRA and is limited to what they can contribute to a 401k
       plan due to top heavy rules (unable to contribute 15% into pre tax or tax free investments), I
       recommend using either low turnover mutual funds or a combination of low turnover mutual funds
       and variable annuities.
      While an option for high income earners, I do not personally choose variable annuities at this

Worth mentioning:

      Don‘t commit to VA‘s until you‘re sure you are ready. Once you‘re in, you‘re in.
      Never, ever, ever roll an IRA, 401k or 403b into a VA. These three things already have the
       benefit of tax deferred growth and you do not need a VA.
      I, myself, fit all the pre-requisites for VA‘s; yet I do not personally own any. I highly prefer
       mutual funds and paid for real estate for investors on Baby Step 7.

 Investing For College:
I recommend investing the first $2,000 per year in an Education Savings Account, aka ESA, aka
Coverdell Savings Account. ESA‘s are very simple and work much the way a personal IRA does. When
saving for a young child that will attend a public school, the ESA will usually be all you need.

For investing more than this amount or if your income exceeds $200,000 annually, choose a 529 plan.
The challenge with 529‘s is that every state has a different 529 plan and they all vary in mechanics. Some
allow you to pick mutual funds, some require you to choose funds based on your child‘s age, while others
are pre-paid tuition programs.

When choosing a 529 plan, I strongly suggest picking a plan that allows you to choose the funds up front
and to keep those funds all the way up until time to use the funds for education. Remember to stick with
the four types of funds I suggests. (Don‘t use the pre-paid plans or ones that do age based asset

Long Term Care Insurance:
I strongly recommend LTC as part of your plan at age 60. Sales people in the LTC industry can be very
enthusiastic about purchasing it prior to age 60. Even so, I will be purchasing when I am 60. Also, it is
OK to purchase LTC even if you do not have a sizable estate to protect as long as the premiums are well
within your budget. An example might be a 60 year old couple with a plentiful current income; but not a
large estate. This couple may choose LTC simply for the quality of care it will provide them.

Disability Insurance:
I strongly suggest purchasing long term disability insurance as income replacement in the event you are
disabled if affordable. The cost of long term disability depends heavily on your occupation. White collar
employees carry less risk than blue collar employees and therefore are less expensive to insure. For short
term disabilities (90 to 180 days), I suggest having a fully funded emergency fund and do not recommend
purchasing short term disability policies.

Life Insurance:
I strongly suggests purchasing 15 year (or longer) level term life insurance. Purchase life insurance equal
to 8 to 10 times your annual income. The logic behind this is that a beneficiary could invest the entire
amount into mutual funds, and draw 8% to 10% annually as income without actually consuming the
original insurance amount. Effectively, this replaces the income that was being generated by the deceased
person. Never purchase any type of cash value or permanent insurance such as whole life, variable life,
universal life, etc. Never cancel any old policy until the replacement policy is fully in force.

Exchange Traded Funds: (ETFs)
I do not own ETFs and do not recommend them as part of your investment plan. ETFs are baskets of
single stocks that intend to operate like mutual funds; but they are not mutual funds.

Separate Account Managers:
SAM‘s are third party investment professionals that buy and sell stocks or mutual funds on your behalf.
Put simply, I'm never going to get near this. I'm sticking with the team of manager‘s in large, old,
experienced mutual funds.

Real Estate Investment Trusts: (REITs)
I do not own any REITs and do not suggest them as part of your investment plan. As a category, REITs
just don‘t stack up to good growth stock mutual funds. If you really want to invest in REITs, limit this to
no more than 10% of your total investment portfolio.

Equity Indexed Annuities
I do not own Equity Indexed Annuities and do not suggest them as part of your investment plan. Equity
Indexed Annuities agree contractually to limit your loss while you agree to limit your gains. I suggest
investing directly into index funds if you want to follow an index such as the S&P 500 or similar.

Thrift Savings Plan: (TSP) Dave‘s suggestion is to invest:

      60% in C fund/plan
      20% in S fund/plan
      20% in I fund/plan

 Values Based Investing:
I do not use a values based investing approach. Long discussion made short:

      I agree with the concept. If you can pick between two similar mutual funds; one invests in things
       you agree with and the other in things you do not agree with, it makes sense to pick the one that
       aligns with your beliefs.
      However, few of these funds stand up to my criteria for picking mutual funds (5 years old or older,
       long history of strong rates of return; professionally managed by a team of mutual funds
       managers, etc.)
      This is a very personal decision you will have to make. It‘s what‘s known as a slippery slope: If
       you no longer invest in funds that might invest in a company that supports abortion, to be
       consistent, you will need to stop shopping at the grocer that sells pornography. You would also
       need to stop banking because nearly all banks contribute to United Way, which supports Planned
      Do not choose these funds out of guilt. Do not make poor investment decisions to choose these

 Pay a Pro or Do it Yourself?
Pay a pro. I still choose to use a pro and suggest you do to. Statistics show that "do it yourselfers" are
quick to jump out of funds when they begin to under perform. A good professional advisor will remind
you why you chose the fund and prevent you from buying high and selling low.

Commissions and Fees:

       I suggest choosing A shares (upfront commissions). Long term, class A shares are much less
        expensive than B shares or C shares.
       I do not personally choose fee based planning. (paying 1% to 2.5% annual fees for a brokerage
        account). With an A share mutual fund, I pay an upfront load of 5% to 6% once. But with a fee
        based account, also known as a wrap account, you agree to pay a 1% to 2.5% fee every year -
        forever. As your account grows, the 1% to 2.5% fee will really add up.

 Working With Your Advisor:
They advise, you make decisions. This is very important. You are paying them for advice and the ability
to teach you enough to make smart decisions about your investments. You are not handing over this
responsibility because they are a professional or even because they are trusted by Dave Ramsey. Retain
ownership and responsibility for all final decisions. Don‘t invest in anything unless you can easily
explain how the investment works to your spouse. If you cannot communicate easily with your financial
advisor, find one that does a better job of communicating. Take your time and make wise decisions.

Seem too simple? Investing doesn‘t have to be complicated. Dave fits all the profiles of a wealthy,
knowledgeable investor; but he really does keep it as simple as you hear him teach on The Dave Ramsey
Show each day. Wealthy people find simple ways that work, and then do them over and over and over.
Happy Investing!

Find Dave's recommended advisor in your town today at:


                                               Top Articles
Dave's Thoughts on Investing here:
Three Retirement Tips for Late Starters here:

More About: Investing here: http://www.daveramsey.com/article/plan-now-for-your-golden-

How to Survive the Roller Coaster Economy

I know that the recent media coverage about the economy scares investors. The smartest thing you can do
right now is hold on to your investments. Do not cash them out.

That's what I'm doing. I have a lot of money invested in the American economy through growth stock
mutual funds. But you know what? I'm not touching those funds. I'm riding this market roller coaster
to the very end. Why?

Well, people who make money in the stock market are the ones who think long-term and don't jump in
and out based on the market fluctuations. Market timing is trying to predict when to add or withdraw
your money in the market; historically, it doesn't work. After all, the only way to get hurt on a roller
coaster is to jump off!

However, staying invested ensures that my investments won't miss those best-performing days. And
guess what: if you missed just 10 of the stock market's best-performing days over the past 20 years, you
would have lost tens of thousands of dollars!

I honestly believe that 10 years from today, you'll look like a genius if you hold on to your current mutual
funds! Keep thinking long term. That's what I'm doing. I'm not cashing out. I believe the market and my
mutual funds will be okay.

                                 The Wisdom of Great Investors
                                               Davis Advisors

During extreme periods for the market, investors often make decisions that can undermine their ability to
build long-term wealth.
When faced with such periods, it can be very valuable to look back in history and study closely the
timeless principles that have guided the investment decisions of some of history‘s greatest investors
through both good and bad markets. By studying these great investors, we can learn many important
lessons about the mindset required to build long-term wealth.

With this goal in mind, the following pages offer the wisdom of many of history‘s most successful
investment minds, including, but not limited to; Warren Buffett, Chairman of Berkshire Hathaway and
one of the most successful investors in history; Benjamin Graham, recognized as the ―Father of Value
Investing‖ and one of the most influential figures in the investment industry; Peter Lynch, portfolio
manager and author, and Shelby Cullom Davis, a legendary investor who turned a $100,000 investment in
stocks in 1947 into over $800 million at the time of his death in 1994.

Though each of these great investors offers perspective on a distinct topic, the common theme is that a
disciplined, patient, unemotional investment approach is required to reach your long-term financial goals.
We hope this collection of wisdom serves as a valuable guide as you navigate an ever-changing market
environment and build long-term wealth.

Avoid Self-Destructive Investor Behavior

―Individuals who cannot master their emotions are ill-suited to profit from the investment process.‖
Benjamin Graham. Father of Value Investing
Emotions can wreak havoc on an investor‘s ability to build long-term wealth. This phenomenon is
illustrated in the study below. Over the period from 1988-2007, the average stock fund returned 11.6%
annually, while the average stock fund investor earned only 4.5%.
Why did investors sacrifice nearly two-thirds of their potential return? Driven by emotions like fear and
greed, they engaged in such negative behaviors as chasing the hot manager or asset class, avoiding areas
of the market that were out of favor, attempting to time the market, or otherwise abandoning their
investment plan.
Great investors throughout history have understood that building long-term wealth requires the ability to
control one‘s emotions and avoid self-destructive investor behavior.

Source: Quantitative Analysis of Investor Behavior by Dalbar, Inc. (July 2008) and Lipper. Dalbar computed the ―average stock fund investor‖ returns by using
industry cash flow reports from the Investment Company Institute. The ―average stock fund return‖ figures represent the average return for all funds listed in
Lipper‘s U.S. Diversified Equity fund classification model. Dalbar also measured the behavior of a ―systematic investor‖ and ―asset allocation investor‖. The
annualized return for these investor types was 5.8% and 3.5% respectively over the time frame measured. All Dalbar returns were computed using the S&P
500® Index. Returns assume reinvestment of dividends and capital gain distributions. Past performance is not a guarantee of future results.

Understand That Crises Are Inevitable

―History provides a crucial insight regarding market crises: They are inevitable, painful, and ultimately
surmountable.‖ - Shelby M.C. Davis. Advisor and Founder, Davis Advisors
History has taught that investors in stocks will always encounter crises and uncertainty, yet the market has
continued to grow over the long term. The chart below highlights the myriad crises that faced investors
over the past four decades, along with the performance of the S&P 500® Index over the same time period.
Investors in the 1970s were faced with stagflation, rising energy prices and a stock market that plummeted
44% in two years. Investors in the 1980s dealt with the collapse of the major Wall Street investment bank
Drexel Burnham Lambert and Black Monday, when the market crashed over 22% in one day. In the
1990s, investors had to weather the S&L Crisis, the failure and ultimate bailout of hedge fund Long Term
Capital Management and the Asian financial crises. Investors in the beginning of the 2000s experienced
the bursting of the technology and telecom bubble, 9/11 and the advent of two wars. Today, investors are
faced with the collapse of residential real estate prices, economic uncertainty and a turmoil in the financial
services industry. Through all these crises, the long-term upward progress of the stock market has not
been derailed.
Investors who bear in mind that the market has grown despite crises and uncertainty may be less likely to
overreact when faced with these events, more likely to avoid making drastic changes to their investment
plans and better positioned to benefit from the long-term growth potential of equities.

Source: Yahoo Finance. Graph represents the S&P 500® Index from January 1, 1970 through December
31, 2007. Past performance is not a guarantee of future results.

Don’t Attempt to Time the Market

―Far more money has been lost by investors preparing for corrections or trying to anticipate corrections
than has been lost in the corrections themselves.‖ - Peter Lynch. Legendary Investor and Author
Market corrections often cause investors to abandon their investment plan, moving out of stocks with the
intention of moving back in when things seem better–often to disastrous results.
The chart below compares the 15 year returns of equity investors (S&P 500® Index) who remained
invested over the entire period to those who missed just the best 10, 30, 60 or 90 trading days:
n The patient investor who remained invested during the entire 15 year period received the highest
  average annualized return of 10.5% per year.
n The investor who missed the best 30 trading days over this 15 year period saw his return plummet to
  only 2.2%.
n Amazingly, an investor needed only to miss the best 60 days for his return to turn negative!
Investors who understand that timing the market is a loser‘s game will be less prone to reacting to short-
term extremes in the market and more likely to adhere to their long-term investment plan.

Source: Bloomberg and Davis Advisors. The market is represented by the S&P 500® Index. Past
performance is not a guarantee of future results.

Be Patient

―Despite inevitable periods of uncertainty, stocks have rewarded patient, long-term investors.‖
Christopher C. Davis. Portfolio Manager, Davis Advisors

One of the most common attributes among great investors is patience.They recognize that while the mood
of the market may cause a stock price to fluctuate widely over the short term, over longer periods the
value of the underlying business often asserts itself. The two charts below illustrate the average annual
returns for stocks over one year and five year periods from 1928–2007. The top chart indicates that stocks
delivered a positive return in 59 out of 80 one year periods (74% of the time). The lower chart indicates
that by extending the holding period to only five years, stocks delivered a positive return 93% of the time
(71 out of 76 periods).
When weathering a challenging period for the market, remember that throughout history, stocks have
rewarded patient, long-term investors. Such perspective may help you avoid making a decision that can
hamper your ability to reach your financial goals.

Source: The performance was obtained from a combination of sources, including, but not limited to,
Thomson Financial, Lipper and index websites. Returns are annualized total returns. Past performance is
not a guarantee of future results.

Don’t Let Emotions Guide Your Investment Decisions

―Be fearful when others are greedy. Be greedy when others are fearful.‖ - Warren Buffett. Chairman,
Berkshire Hathaway
Building long-term wealth requires counter-emotional investment decisions–like buying at times of
maximum pessimism or resisting the euphoria around investments that have recently outperformed.
Unfortunately, as the study below shows, investors as a group too often let emotions guide their
investment decisions.
The line in the chart below represents the amount of money investors added to domestic stock funds each
year from January 1997–June 2008, while the bars represent the yearly returns for stock funds. Following
three years of stellar returns for stock funds from 1997–1999, euphoric investors added money in record
amounts in 2000, just in time to experience three terrible years of returns from 2000–2002. On the heels
of these three terrible years, investors turned pessimistic and placed far less money into stock funds in
2002, right before stocks delivered one of their best returns ever in 2003 (29.7%). After a difficult start to
2008, fearful investors pulled money from stock funds.
Great investors recognize that an unemotional, objective, disciplined investment approach, which often
includes buying at times of maximum pessimism and exploring out-of-favor areas at times of maximum
optimism, is a key to building long-term wealth.

Source: Morningstar and Strategic Research Institute as of June 30, 2008. Past performance is not a
guarantee of future results.

Recognize That Short-Term Underperformance Is Inevitable

―The basic question facing us is whether it’s possible for a superior investment manager to
underperform....The assumption widely held is ’no.’ And yet if you look at the records, it’s not only
possible, it’s inevitable.‖ -
When faced with short-term underperformance from an investment manager, investors may lose
conviction and switch to another manager. Unfortunately, when evaluating managers, short-term
performance is not a strong indicator of long-term success.
The study below illustrates the percent of top-performing large cap investment managers from January 1,
1998 to December 31, 2007 who suffered through a three year period of underperformance. The results
are staggering:
n 98% of these top managers‘ rankings fell to the bottom half of their peers for at least one three year
n A full 75% ranked among the bottom quartile of their peers for at least one three year period, and
n 43% ranked in the bottom decile for at least one three year period.
Though each of the managers in the study delivered excellent long-term returns, almost all suffered
through a difficult period. Investors who recognize and prepare for the fact that short-term under-
performance is inevitable–even from the best managers–may be less likely to make unnecessary and often
destructive changes to their investment plans.

Source: Davis Advisors. 160 managers from eVestment Alliance‘s large cap universe whose 10 year
average annualized performance ranked in the top quartile from January 1, 1998–December 31, 2007.
Past performance is not a guarantee of future results.

Disregard Short-Term Forecasts and Predictions

―The function of economic forecasting is to make astrology look respectable.‖ - John Kenneth Galbraith.
Economist and Author
During periods of uncertainty, investors often gravitate to the investment media for insights into how to
position their portfolios. While these forecasters and prognosticators may be compelling, they usually add
no real value.
The study below tracked the average interest rate forecast from The Wall Street Journal Survey of
Economists from December 1982–June 2008. This forecast was then compared to the actual direction of
interest rates. Overall, the economists’ forecasts were wrong in 35 of the 52 time periods–67% of the
Do not waste time and energy focusing on variables that are unknowable and uncontrollable over the short
term, like the direction of interest rates or the level of the stock market. Instead, focus your energy on
things that you can control, like creating a properly diversified portfolio, determining your true time
horizon and setting realistic return expectations.

Source: Legg Mason and The Wall Street Journal Survey of Economists. This is a semi-annual survey by
The Wall Street Journal last updated June 30, 2008. *Benchmark changed to 10 Year Treasury. Past
performance is not a guarantee of future results.


―You make most of your money in a bear market, you just don’t realize it at the time.‖ - Shelby Cullom
Davis. Diplomat, Legendary Investor and Founder of the Davis Investment Discipline

It is important to understand that periods of market uncertainty can create wealth-building
opportunities for the patient, diligent, long-term investor. Taking advantage of these opportunities,
however, requires the willingness to embrace and incorporate the wisdom and insight offered in these
pages. History has taught us that investors who have adopted this mindset have met with tremendous


Avoid Self-Destructive Investor Behavior

Chasing the hot-performing investment category or making major tweaks to your long-term investment
plan can sabotage your ability to build wealth. Instead, work closely with your financial advisor to outline
your long-term goals, develop a plan to achieve them and set the expectation that you will stick with that
plan when faced with difficult periods for the market.

Understand That Crises Are Inevitable

Crises are painful and difficult, but they are also an inevitable part of any long-term investor‘s journey.
Investors who bear this in mind may be less likely to react emotionally, more likely to stay the course, and
be better positioned to benefit from the long-term growth potential of stocks.

Don’t Attempt to Time the Market

Investors who understand that timing the market is a loser‘s game will be less prone to reacting to short-
term extremes in the market and more likely to adhere to their long-term investment plan.

Be Patient

Though periods of short-term volatility for stocks are to be expected, it is crucial to bear in mind that
historically stocks have rewarded patient, long-term investors.

Don’t Let Emotions Guide Your Investment Decisions

Great investors throughout history have recognized the value of making decisions that may not feel good
at the time but that will bear fruit over the long term–such as investing in areas of the market that
investors are avoiding and avoiding areas of the market that investors are embracing.

Recognize That Short-Term Underperformance Is Inevitable

Almost all great investment managers go through periods of underperformance. Build this expectation
into your hiring decisions and also remember it when contemplating a manager change.

Disregard Short-Term Forecasts and Predictions

Don‘t make decisions based on variables that are impossible to predict or control over the short term.
Instead, focus your energy toward creating a diversified portfolio, developing a proper time horizon and
setting realistic return expectations.

                         Qualified and Non-Qualified Retirement Plans
                           From: http://www.1foryourlife.com/retirement-plans.php

Let‘s take a look at retirement plans.. Each retirement plan is different and each is designed to cater to
different employer goals and employee needs.

Qualified retirement plan

This is a retirement plan that is certified by the " Internal Revenue Code Section 401(a)" and the
"Employee Retirement Income Security Act of 1974 (ERISA)" therefore it is entitled for advantageous
tax treatment, permitting employers to subtract yearly permissible contributions for every participating
employee and earnings on said contributions are "tax-deferred" until taken out for every participant; some
taxes may even be deferred further by means of transferring into another different kind of IRA.

For employers, subsidizing a "qualified retirement plan" can:

      Draw experienced employees into their company.
      Motivate and retain good employees.
      Help employees set aside financial aid for future use or for retirement because the benefits of the
       Social Security alone are not enough to support a sensible way of living for retirees.
      Protect plan assets from creditors.

Two main categories of "Qualified retirement plans"

   1. "Defined benefit plans" are "company retirement" plans, like pension plans, where when an
      employee reaches retirement, he will receive a specified amount that is usually based on his salary
      and number of years in the service, whereby his employer carry the risk in investment. The
      employee alone, or both employer and employee, can contribute.
   2. "Defined contribution plan". This type of plan outlines the amount that flows to employees on how
      much should be contributed by an employer each year to the retirement plan. This kind of plan
      keeps account balances of all participants and dictates that no participant can receive an allotment
      of beyond the "lesser of 25 percent" of compensation or 30,000 dollars throughout any year.

Principal "defined contribution plan" types:

      "Profit sharing plans". Accumulate funds by way of employer contributions in an individual
       account for every eligible employee. Every participating employee's share of his employer's
       contribution generally is based on his compensation level. These plans let employers establish,
       within clear and specified limits, the amount to be provided or contributed annually.
      "Money purchase plans". Similar to "profit sharing plan", however the contribution rate is a "fixed
       percentage" for every year, like for instance 15 percent of every eligible employee's salary.
      "Target benefit plans". This is an adaptation a "money purchase plan" but instead of beginning
       with a "fixed percentage" for every employee, it specifies a particular benefit, like 50 percent of
       compensation at retirement; it also bases contribution of employees on the funds needed to fulfill
       that obligation.

Contribution for older employees will generally be a lot higher compared to the contribution of younger
employees for the same amount, because older employees have a shorter duration to build up the essential
funds. Here, the real "retirement benefit" is not assured but will largely depend on investment earnings.

      "401(k) Plans." These plans permit employees to state the "pre-tax" income amount that must be
       subtracted from the salary of the employee and deposited into their retirement account. Employees
       are given the right to establish the level contribution that will suit their individual financial
       situation best.
      "Stock bonus plans and employee stock ownership plans". ESOP's are meant to utilize company
       stock for accumulating equity as a retirement resource or supply for company employees.
      "Simplified employee pension". SEPs function similar to "profit sharing plan" or "money purchase
       plan" whereby the employer sets an amount to contribute into every employee's account every
       year. However the contribution is not deposited to a retirement trust but is converted into IRA so
       that the employee has jurisdiction over the funds in his IRA.
      403(b). This is a "tax-deferred retirement plan" for specified tax-exempt employers like public
       schools, "non-profit organizations" and some hospitals. Contributions may grow "tax-deferred"
       until it is withdrawn then it is taxed like an ordinary income.

Non-qualified retirement plan

This type of retirement plan do not meet requirements set by "Internal Revenue Code Section 401(a)" and
the "Employee Retirement Income Security Act of 1974 (ERISA)". These plans are financed by
employers therefore are flexible compared to "qualified retirement plans" however do not include tax
benefits that "qualified retirement plans" offer. Benefits, structured in annuities form, are paid generally at
retirement age and are "taxed" just like "ordinary income tax"; or in "lump sum" or one single payment
that may be transferred or changed into IRA so to suspend or defer taxes.

"Top-Hat plans" (THP), "Excess benefit plans" (EBP) and "Supplemental executive retirement plans"
(SERP) are types of non-qualified and deferred compensation plans patterned to complement or enhance
"qualified retirement plans".

"Non-qualified retirement plan" accomplish to supplement "qualified retirement plans" by compensating
the benefits that are unavailable to qualified plans and typically covers highest company paid employees.
It may be non-funded or funded. The main drawback with this plan is that actually nothing is promised to
the employees should the company goes into bankruptcy, or is sold to another company.

You must always know your options and should develop an opportunity strategy way before your
retirement. Pursuing professional investment advice will help you manage and synchronize your options
with a complete estate and financial plan.

                                 Your Retirement Savings Options
          From: https://personal.vanguard.com/us/insights/retirement/saving/retirement-savings-options

Knowing how—and how much—to save is a big part of your retirement program. Retirement planning
experts always tell us to save, save, then save some more. Though the drumbeat can become tiresome, its
message couldn't be timelier. The sooner you start saving, the better off you'll be.

To help you make informed decisions, we offer some important ways to potentially improve your
retirement savings options:

Maximize your employer plan contributions. Participate in your employer-sponsored retirement plan
and don't leave money on the table—contribute at least the amount your employer will match and more if
you can. As your income rises, consider investing the extra money in your plan.

Open an IRA. Whether Roth or traditional, an IRA can be an excellent way to augment your employer
plan and continue saving. The Investment Company Institute says IRA owners tend to have significantly
more assets than those who don't have one.

Don't forget about annuities or taxable investments. Even if you've maxed out on the retirement side,
you still can supplement your savings with other types of investments. For example, annuities can be
suitable for those who have contributed the maximum to employer-sponsored retirement plans but still
want to set aside more tax-deferred money.

Other tips to consider:

Keep your retirement savings intact. Don't withdraw or borrow money from your retirement accounts
unless it's absolutely necessary. If you do, you'll probably suffer some taxes and penalties and lose the
opportunity to enjoy compounded investment earnings on the amount you withdraw.

Consider requesting a direct rollover if you change jobs. Have the assets in your employer plan sent to
your traditional IRA or your new employer's plan. You'll avoid taxes and penalties, keep your assets
growing tax-deferred, and continue to benefit from the power of compounding.

Review your retirement portfolio annually and rebalance it if necessary. After you select a mix of
funds that meets your goals and risk tolerance, shifts in the financial markets may cause your portfolio to
change from its original allocation. If so, you can adjust by redirecting new investments or gradually
moving money into different funds.

Take the long-term view. Frequently trading in and out of funds to "chase returns" is not a viable
investment strategy. If history is any indication, today's hot fund could well be tomorrow's big loser.

Expect years with losses. A portfolio of 80% stocks and 20% bonds produced a negative annual return
23 times between 1926 and 2008, yet its average annual return was almost 10%.* If you're a risk-averse
investor, you can buy more generally stable options such as money market funds—but understand that
lower risk often leads to lower long-term returns.

                                     Traditional IRA vs Roth IRA

                      From: http://beginnersinvest.about.com/cs/iras/f/tradvsrothira.htm

Deciding whether to open a Roth IRA or Traditional IRA is a major decision with potentially large
financial consequences. Both forms of the IRA are great ways to save for retirement, although each offers
different advantages.

Traditional IRA Profile

   o Tax deductible contributions (depending on income level)
   o Withdraws begin at age 59 1/2 and are mandatory by 70 1/2.
   o Taxes are paid on earnings when withdrawn from the IRA
   o Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits,
   o Available to everyone; no income restrictions
   o All funds withdrawn (including principal contributions) before 59 1/2 are subject to a 10% penalty
     (subject to exception).

Roth IRA Profile

   o Contributions are not tax deductible
   o No Mandatory Distribution Age
   o All earnings and principal are 100% tax free if rules and regulations are followed
   o Funds can be used to purchase a variety of investments (stocks, bonds, certificates of deposits,
   o Available only to single-filers making up to $95,000 or married couples making a combined
     maximum of $150,000 annually.
   o Principal contributions can be withdrawn any time without penalty (subject to some minimal

Tax Deferred vs. Tax Free

The biggest difference between the Traditional and Roth IRA is the way the U.S. Government treats the
taxes. If you earn $50,000 a year and put $2,000 in a traditional IRA, you will be able to deduct the
contribution from your income taxes (meaning you will only have to pay tax on $48,000 in income to the
IRS). At 59 1/2, you may begin withdrawing funds but will be forced to pay taxes on all of the capital
gains, interest, dividends, etc., that were earned over the past years.

On the other hand, if you put the same $2,000 in a Roth IRA, you would not receive the income tax
deduction. If you needed the money in the account, you could withdraw the principal at any time
(although you will pay penalties if you withdraw any of the earnings your money has made). When you
reached retirement age, you would be able to withdraw all of the money 100% tax free. The Roth IRA is
going to make more sense in most situations. Unfortunately, not everyone qualifies for a Roth. A person
filing their taxes as single can not make over $95,000. Married couples are better off, with a maximum
income of $150,000 yearly.

Is there any way to avoid the 10% early withdrawal penalty on my IRA?

Yes! There are ways to avoid paying early withdrawal fees. Many IRA owners are aware they can be hit
hard with penalty fees if they withdraw money early. Fortunately, there are ways to avoid these fees if an
emergency or other qualifying situation arises. Before we begin, let me say that even with these
allowances, you should make every effort to avoid taking money out of your retirement accounts early,
especially if you are young. By withdrawing money, you are losing decades of tax-free compounding
which can cost you hundreds of thousands of dollars by the time you retire.

       1. Permanent disability of IRA owner

       Money can be withdrawn without penalty in the event the IRA holder becomes permanently

       2. Death of IRA owner

       It's small consolation, but if you kick-the-bucket before you're 59 1/2 years old, your estate won't
       be hit with the 10% early withdrawal fee.

       3. Withdrawals are used to pay non-reimbursed medical expenses

       In the event of serious illness or injury that requires prolonged or expensive medical treatment,
       Uncle Sam will waive the early withdrawal fee on the condition that the expenses are in excess of
       7.5% of your adjusted gross income.

       4. Withdrawals used to help pay for first-time home purchase

       Despite a lifetime limit of $10,000, this exemption can make it much easier for an IRA owner to
       buy a house.

       5. Higher education costs

       College can be expensive. Thankfully, certain higher education costs for you, your spouse,
       children or grandchildren can be withdrawn penalty-free. You may still owe federal income tax,
       however. For more information, read the Internal Revenue Service article Notice 97-60 Using IRA
       Withdrawals To Pay Higher Education Expenses.

       6. Money is used to pay back taxes to the IRS after a levy has been placed against the IRA

       This is not the kind of exemption for which you want to qualify, but it may save you money if you
       find yourself in an uncomfortable position with the IRS.

       7. Withdrawals used to pay medical insurance premiums

       Out of a job? The rest of the world may be topsy-turvy, but rest assured, you won't be penalized
       for using retirement money to pay your medical insurance as long as you have been on
       unemployment for longer than twelve weeks.

       8. Made on or after the day the IRA owner turns 59 1/2

       Once you have reached the qualifying age of 59 1/2, you can make penalty-free regular
       withdrawals upon which to live.

A Caveat

There is one catch to these qualifying exemptions; the holder of an IRA is subject to a five year waiting
period (measured in tax, not calendar, years). An investor could not, for example, deposit $3,000 in their
IRA this year and withdrawal it next year penalty-free even if it would otherwise qualify as an exemption.

 Where can I open an IRA?

IRA's of both types can be opened through a bank or brokerage house. If you are interested in holding
stocks or bonds in your IRA, it may be wiser to open an account with your broker. It should require no
more than a few minutes' visit to the local branch office, or a trip to their website.

How much money do I need to open an IRA?

Minimum opening fees differ by institution, but are dramatically less than other types of investment

How much can I contribute to my IRA each year?

Regardless of the type of IRA you choose, the Federal government imposes annual contribution limits.
The chart below shows the maximum dollar amount individuals are allowed to deposit into their IRA each
year. After 2008, the contribution limit will raise in increments of $500 depending upon the level of

Deposits into your IRA do not have to be made at the same time. (For example: In the year 2008, a 35
year old woman could deposit $416.67 into her IRA each month. At the end of the year, it would add up
to the maximum $5,000.)

Due to the tax advantages of investing through an IRA, it is normally best to try and make the maximum
annual contribution. The use-it-or-lose-it nature of contributions makes this all the more important (e.g., If
you deposit $3,000 in 2008, you can't deposit $7,000 in 2009 [the $5,000 + the $2,000 you didn't deposit
the year before]. You cannot contribute more than the total allowable amount during any fiscal year.)

IRA Contribution Limits

           YEAR              AGE 49 & BELOW                     AGE 50 & ABOVE
           2002-2004         $3,000                             $3,500
           2005              $4,000                             $4,500
           2006-2007         $4,000                             $5,000
           2008              $5,000                             $6,000
           2009              $5,000                             $6,000
           2010              Indexed to Inflation               Indexed to Inflation

                                               College Funding
                   From: https://personal.vanguard.com/us/insights/collegesavings/paying-for-college

Thanks to government-improved savings plans, you have several choices, each with its own advantages
and drawbacks.

Which option—or options—you choose depends on several factors, such as whether or not it gives tax
breaks, limits the amount you're allowed to save, has costs and fees, offers investment options, requires a
minimum amount to get started, or lets the parent or guardian have control of the account.

Here are four of the top ways to save and some of their pros and cons. For more details, see our college
savings options comparison chart.

529 college savings plan

These plans, typically state-sponsored, offer tax advantages, high contribution limits, and investment
flexibility. Your savings can be used for qualified higher-education expenses at almost any college or

                                  Contributions grow federally tax-free and you may even get state income
Tax-advantaged growth
                                  tax breaks.*
                                  Withdrawals are free from federal (and sometimes state) income tax if
Tax-free withdrawals
                                  used to pay for qualified higher education expenses.*
                                  High limits on the amount you're able to save—sometimes more
High contribution limit
                                  than $300,000.
Low financial aid impact          Minimal impact on financial aid.
                                  A range of available investment options, from set-it-and-forget-it to do-it-
Investment options
                                  yourself portfolios.
Account control                   Control stays in the hands of the account owner.
                                  A required minimum amount is needed to invest. This amount depends on
Minimum investment
                                  the plan you choose, but most plans have low initial investments.
Costs & fees                      Potential expenses could impact your savings.

* Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty
tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on
meeting other requirements.

Investment returns are not guaranteed, and you could lose money by investing in the plan.

Education savings account (ESA)

ESAs allow you to contribute $2,000 a year per child under the age of 18, and earnings grow federally
tax-free. Your savings can be used for education expenses at any level—from kindergarten through
graduate school. You must meet income limits to make the full contribution.

                                 Contributions grow federally tax-free and you may even get state income
Tax-advantaged growth
                                 tax breaks.*
                                 Withdrawals are free from federal (and sometimes state) income tax if
Tax-free withdrawals
                                 used to pay for qualified education expenses.*
Low financial aid impact         Minimal impact on financial aid.
                                 You can choose from a broad lineup of Vanguard mutual funds. If
                                 you're interested in individual securities, exchange-traded funds, or other
Investment options
                                 companies' mutual funds, you can open an ESA through Vanguard
                                 Brokerage Services®.
Account control                  Control stays in the hands of the account owner.
                                 You can use funds for kindergarten through graduate school, or up until
                                 your beneficiary reaches age 30.
                                 Maximum contribution of $2,000 per year may not be enough to meet
Low contribution limit
                                 your college savings goals.
                                 Income limitations apply. The amount you can contribute is reduced and
                                 gradually phased out for a modified adjusted gross income of between
Income limit
                                 $95,000 and $110,000 if single or between $190,000 and $220,000 if
                                 married and filing jointly.

* Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty
tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on
meeting other requirements.

All investments are subject to risk.

UGMA/UTMA account

The Uniform Gifts to Minors Act and Uniform Transfers to Minors Act provide simple ways to give gifts
to children, who then own the account at the age of majority (18–21, depending on the state). You may
use the account to benefit the child in any way, excluding parental obligations like food and shelter. If you
have an existing UGMA/UTMA account, you can sell the assets and transfer the proceeds into a 529 plan
or ESA of your choice.

High contribution limit          No limit on how much you can contribute.
                                 A broad lineup of Vanguard mutual funds. If you're interested in
                                 individual securities, exchange-traded funds, or other companies' mutual
Investment options
                                 funds, you can open an UGMA/UTMA through Vanguard Brokerage
Flexibility                      No penalty if withdrawals aren't used for college.
Unlimited participation          No limit on who can contribute.
Irrevocability                   Contributions are irrevocable.
                                 Once he or she reaches the age of majority, the beneficiary controls the
Account control
                                 money and can use it for any reason.
Sole beneficiary                 You can't change beneficiaries.
                                 Significant impact on federal financial aid. The account is treated as the
High financial aid impact
                                 child's asset and counted more heavily in calculations.
Taxable earnings                 Earnings are subject to federal income or capital gains tax.

All investments are subject to risk.

Individual mutual funds

Mutual funds offer a flexible way to save for college, have minimal impact on financial aid, and keep the
investments under the owner's control. You can invest as much as you want and use the funds for any

High contribution limit         No limit on how much you can contribute.
Low financial aid impact        Minimal impact on financial aid if the parent owns the account.
Investment options              A broad lineup of Vanguard mutual funds.
Flexibility                     No penalty if withdrawals aren't used for college.
No tax advantages               No federal tax benefits or state tax breaks.

                                         Student Loan Backlash
                                      from daveramsey.com on 27 Aug 2009

Getting a student loan can hurt you much worse than just a monthly payment. Nowadays, many people
think you can't be a student without a student loan. It's easy to get a federal student loan or even go to the
local bank to pay for your education, but doing so hurts both you and the economy in the long run.

The Rise in Lifestyle

Unfortunately, people are borrowing more than ever before. In 2001, $4 billion in student loans were
taken out. Last year, that number jumped to $17 billion. Some people may say it‘s because of higher
tuition costs, and yes, that is part of the reason. But more than likely, a lot of it is lifestyle choices. When
some people to go college, they want to live in the off-campus apartment and eat at restaurants instead of
living in the dorms and eating dorm food.

At this point in your life, it‘s time to face some facts. You don‘t make any money, so you don’t need to
spend any money. When you get out of college, you won‘t still be feeling a meal in your belly from your
junior year. But if it‘s one of the many things you bought with your student loan, then you‘ll be paying for
it for years to come. That‘s stupid! Which would you rather be – a debt-free graduate or a new graduate
with tens of thousands of dollars in debt?

Borrowing Hurts Us All

The numbers are convincing. Let's say you borrow $47,000 for a student loan. At a 5% interest rate, the
payments are about $500 over 10 years. After 10 years, you've spent almost $60,000. If instead, you
invest that money in a good growth-stock mutual fund averaging 12%, after 10 years you will have saved
$115,000! Which do you think is better?

Borrowing so much hurts the economy in multiple ways. More debt means less money invested. If money
isn't invested, the economy doesn't grow as well. More debt also means less money to outright buy things,
which leads to more financing to buy things.

The sad part is that after you've gotten a student loan and paid on it for a couple of years, that's when the
reality hits you. That's when you realize that you have obligated yourself to pay thousands of dollars in
interest over several years, instead of keeping that money for yourself and investing it, or giving it away,
or even saving up and buying things with cash.

Well ... THIS IS YOUR WAKE-UP CALL! Don't take out a student loan. You can apply for
scholarships and grants, work part-time or go to a cheaper school. But it's not worth it to take out a loan
and start behind the financial 8-ball in life when you graduate.

If you are paying on a student loan, get on a budget today and start paying it off. The sooner you
pay it off, the more money you'll save in interest. Make it happen!

How can I avoid student loans?
Start with grants and scholarships. You‘ll have a much better chance if your GPA is much higher than
average. Good grades are an investment. Students in the top 10 percent of their classes have many more
options. Work part-time if you need the money. You could also try attending an affordable local college

to complete your first few years of required classes. Then, if you can pay cash, transfer to the school of
your dreams.

Other alternatives:

      Internships with commitment to hire after graduation
      Church gifts and scholarships
      Private scholarships and grants
      Working prior to college admittance
      Working on campus or while in college

How do I find scholarships and grants?
Get one or all of these books to help find financial support for college:

      The Scholarship Book by Daniel Cassidy
      Free Money from Colleges and Universities by Laurie Blum
      Winning Scholarships for College by Marianne Ragins

You might also approach your church. If you're a student that has been active within the church, you may
be eligible for some assistance. Also, depending on your field of study, you may be able to find a business
to sponsor an internship. Dave says, "I worked two campus jobs and a work-study program to pay my
way through college. I also worked with 'gazelle intensity' during the summers." Try some of these unique
ideas to increase those gifts and grants.

                                        The Decade in Review
                      A look at stocks, commodities and memories (good and bad).
                                Provided by Paul Brewer of Woodbury Financial

A turbulent ten years
The 2000s gave us remarkable opportunity and remarkable volatility. They tested our patience, and many
investment strategies. They taught us to hold on, hang in there and diversify.

Was it really a "lost decade"? It depends on how you were invested. Yes, the Dow ended the 1990s at
11,497.12 and ended the 2000s at 10,428.05, amounting to a 9.30% slip. The S&P 500 lost 24.10% in the
same interval. If you had invested a lump sum into an index fund tracking the S&P 500 on December 31,
1999 and left those assets untouched for ten years, you would have ended up with a sizable loss.1,2

Well, that sounds dismal - but how many of us actually invest this way? Very few of us make one lump
sum investment and just watch it for ten years. Thanks to diversification, rebalancing and constant inflows
of new money, quite a few investors were able to grow their assets and/or outperform the S&P 500 in the
past decade.

The fact is, five sectors of the S&P 500 gained 10% or more across the 2000s - health care (+10.85%),
utilities (+10.92%), materials (+24.91%), consumer staples (+31.84%) and energy (+102.12%).2

Few articles about the "lost decade" mention this notable factoid: the Russell 2000 advanced 23.90%
during the 2000s.2 Some investments that focused on buying undervalued small-company stocks gained
an average of 8.3% annually in the 2000s.3

Outside America, developing stock markets shattered all expectations while the developed markets
mirrored American performance. Look at the decade-long gains in key indices in some of the BRIC
nations, as measured by CNBC.com: China, +72%; India, +249%; Brazil, +301%; Russia, +863%.
Compare all that with the benchmark indices in Japan (-44%), France (-34%), Great Britain (-22%) and
Germany (-14%) in the past decade.4 Emerging markets gained an average of 9.3% per year in the last ten

It was a decade of amazing gains in the broad commodities market. From the end of 1999 to the end of
2009, gold advanced 278.52%. How about silver and copper? Silver gained 208.91% and king copper
rose 287.78%. Crude oil rose 210.00% during the 2000s.2

How great a decade was it for the commodities sector? Only one notable commodity posted a ten-year
loss from 12/31/1999 to 12/31/2009. That was palladium, which retreated 8.98%. On the other hand, we
know that 16 commodities gained 100% or more across the decade.2

The two biggest gainers during the 2000s were a pair of crops: sugar (+340.36%) and cocoa (+293.31%).2

Highs and lows.
We are 10 years past the bursting of the tech bubble - March 10 will mark the 10th anniversary of the

NASDAQ's all-time high of 5,132.50.5 And of course, a decade-defining geopolitical event rocked the
markets 18 months later.

General Motors and Chrysler filed for bankruptcy protection in 2009; at the start of the decade, so did
Enron - the company that Fortune Magazine ranked as "most innovative" each year from 1995-2000.6 In
2008, Lehman Brothers, Morgan Stanley, Goldman Sachs, Merrill Lynch, and Washington Mutual either
folded, mutated, or were bought up while AIG, Freddie Mac and Fannie Mae were bailed out.

The Dow hit a new high of 11,723 in January 2000, a post-9/11 closing low of 7,286 in October 2002, and
then ended 2003 at 10,453 (as the DJIA gained 25.32% that year while the dollar lost 14.67%). The Dow
hit new peaks of 11,727 on October 3, 2006 and 14,164 on October 9, 2007. A close of 11,215 on July 2,
2008 officially marked the start of a bear market.7

From March 9, 2009 closing lows to the end of the year, the Dow shot up 59.28% and the S&P 500
advanced 64.83%.2 This led to some to entertain tantalizing thoughts about the birth of a new bull market.
Or it is simply a cyclical bull in a secular bear? The jury is still out, as the saying goes; we can hope for
the best.

What did we learn?
The 2000s taught us lessons about irrational exuberance (companies that had never made a dime were
probably not worth billions) and lessons about the value of diversifying your portfolio. We also learned
lessons in perseverance - those who stayed invested have seen their portfolios make a strong recovery.

The 2000s put investors through some seemingly unimaginable financial headlines. It was a rare decade,
an aberrant one in stock market history - for example, the Dow hadn't had a negative decade since the
1930s, and it had advanced 228.25% over the 1980s and 317.59% for the 1990s.8 Will we see it make a
double- or triple-digit advance in the next ten years? We don't know. Past performance is no indicator of
future success. Yet the awesome potential of the stock market and commodities markets should not be
dismissed - and with economies healing the world over, it is clearly time to look forward and stay


=DJIA [1/16/09]
2 cnbc.com/id/34645043 [12/31/09]
3 articles.latimes.com/2009/dec/31/business/la-fi-stocks31-2009dec31?pg=3 [12/31/09]
4 cnbc.com/id/34643111 [12/31/09]
5 smartmoney.com/investing/economy/the-financial-decade-in-review/?page=2 [12/31/09]
6 smartmoney.com/investing/economy/the-financial-decade-in-review/?page=4 [12/31/09]
7 the-privateer.com/chart/dow-long.html [12/31/09]
8 cnbc.com/id/34619797 [12/29/09]

                             Money Market vs. Certificate of Deposit
One of the biggest questions investors face is, "what do I do with my cash when I'm in-between
investments?". This article seeks to examine two of the most popular choices - certificates of deposits and
money markets - and weighs the pros and cons of each.

In the left corner: certificates of deposit

Certificates of deposit (or CDs for short) are debt instruments issued by banks and other financial
institutions to investors. In exchange for lending the institution money for a predetermined length of time,
the investor is paid a set rate of interest. Maturities on certificates of deposit can range from only a few
weeks to several years with the interest rate earned by the investor increasing in proportion to the time his
capital is tied up in the investment.

Pros: The investor can calculate his expected earnings at the outset of the investment. Certificates of
deposited are FDIC insured for up to $100,000 and offer an easy solution for the elderly who desire only
to maintain their capital for the remainder of their life.

Cons: If the investor opts for a longer maturity and, thus, higher rate of interest, he will lose access to his
funds and forgo alternative uses of his capital.

In the right corner: money markets

Money Markets, on the other hand, offer many of the same benefits as certificates of deposit with the
added features of a checking account. Technically speaking, a money market is more or less a mutual
fund that attempts to keep its share price at a constant $1. Professional money managers will take the
funds deposited in the money market and invest them in government t-bills, savings bonds, certificates of
deposit, and other safe and conservative financial instruments. This income is then paid out to the owners
of the money market.

Investors can open a money market account at most financial institutions. They generally receive a
checkbook with which they can draw upon funds in the account.

Pros: Depositing money in a money market is as easy as depositing cash into a savings or checking
account. Cash is immediately available for alternative investments.

Cons: Some financial institutions place a limit on the number of checks that can be drawn against the
account in any given month. The rate of interest is directly proportional to the investor's level of deposited
assets, not to maturity as is the case with certificates of deposit. Hence, money markets are
disproportionately beneficial to wealthier investors.

The verdict

Although both can be useful, for those who need access to their capital, money markets are far superior.
Many brokerage houses automatically sweep their customer‘s uninvested cash into money markets to earn
interest between investments. This is the ideal solution if you regularly invest because the funds can be
used immediately to purchase stocks, bonds, or mutual funds.

                                      Viaticals: Watch Out!
                 From: http://www.aarp.org/money/credit_debt/a2002-10-01-FraudsViaticals.html

James thought he was doing the right thing when he invested $50,000 in a viatical contract. The retired
investor was told he would be making a humanitarian investment by purchasing the life insurance policy
of a terminally ill person and that he could expect a large profit for himself. But the insured person
wasn’t really sick at all and James was forced to pay the policy premiums to avoid losing his investment.

                                  How Viaticals Are Supposed to Work

When you buy a viatical, you purchase the life insurance policy of a terminally ill person at a discounted
price from a viatical broker who takes a commission. The ill person gets needed money to help pay
expenses and the investor gets the full face value of the policy when the person dies. Brokers also sell a
spin-off of viatical settlements--life or senior settlements--in which the investor is offered the life
insurance policy of an older, healthy person. The investors are told they are helping older people stay
financially solvent in their golden years. The pitch is based on a high rate of return—often 20 to 40
percent—and a humanitarian opportunity to help a sick person, a combination appealing to older


Viaticals can end up costing investors a lot of money. The North American Securities Administrators
Association (NASAA) calls viaticals one of the top ten investment scams. According to Joseph Borg,
former president of the North NASAA and director of the Alabama Securities Commission. Securities
regulators are ―concerned that the inherent risk of viatical investments - gambling on when someone will
die - aren't being adequately disclosed, and second, many investors have been outright defrauded by some
viatical companies or their sales agents."

A Florida Grand Jury in 2000 found as much as 40-50% of the life insurance policies viaticated by
viatical settlement providers may have been procured by fraud. The Securities and Exchange Commission
has taken action against one company that allegedly defrauded 30,000 investors of $1 billion.

Here are a few of the ways people can lose money:

      With improved medical care, the ill or older person may live longer than expected. As the new
       owner of the policy, you have to pay the premiums to keep the policy in force. You tie up your
       money longer and your profit declines the longer the person lives.

      Sometimes the insured person is not ill at all, so the investor will need to make insurance
       payments — sometimes for years — or the investment is lost.

      The insured person may have purchased the life insurance through fraud and the insurance
       company will later refuse to pay the settlement.

      The insurance company or viatical settlement company may go out of business — along with your
       invested money.

      Some brokers have sold the same policy to multiple investors.

      The insured‘s heirs may challenge changes made to the policy.

                                              Protect Yourself

It is important to learn all you can about a viatical before you invest. Failure to research thoroughly the
investment could result in financial disaster. Some questions to ask include:

      Is this investment right for you based on your age, financial status and other personal
       circumstances? If the viator lives longer than expected, your investment dollars will be tied up for
       a longer period of time than expected, and you will be paying the policy premiums.

      Is the viatical investment considered to be securities in your state? Check with your state securities
       regulator to see if it should be--and is registered, and if the broker is licensed. In some states,
       viaticals are regulated as insurance products; in other states they are not regulated at all.

      Who holds the responsibility to pay policy premiums, and for how long? A lapsed policy means
       that you could lose your entire investment.

      What control, if any, do you retain over your investment?

      What financial information will the provider disclose about its history? If the viatical settlement
       provider and/or the insurance company goes bankrupt, you could lose or tie up your investment
       dollars indefinitely.

                                       How to Set Investing Goals
               From: http://www.daveramsey.com/articles/article-list/category/lifeandmoney%5Finvesting/

Most people dream about a nice retirement, sending their kids to college debt-free or building their dream
home. The problem is that many people don‘t know how to make their dreams become a reality. The first,
crucial step in achieving your investment goals is writing them down.

Sounds weird doesn‘t it? However, the act of physically writing down your goals really does help. It
works like a switch, taking your goals from a distant dream to a vision that is ready to go to work. Yet,
this important step is often overlooked. As a result, many people fail to reach their goals simply because
they skip this first step.

To help make your goals a reality, be sure to:

                                        Briefly list any short-term goals.

The keyword here is ―brief.‖ Think bullet points. The more detailed list comes later. Short-term goals can
be things you want to save for or purchase within the next two to five years. An example of a short-term
goal might be buying tires for the car, finish furnishing the house or taking an overseas vacation. Classify
these goals as needs or wants.

                                         Make a list of long-term goals.

Again, make a brief list. Long-term goals are things you want five years or longer from now. Long-term
goals are likely to be retirement, buying a home, or college savings. Ask yourself questions that help you
determine what specific goals you have, based on where you are in life. For example, if you're in your
early thirties, you might already be dreaming of a nice retirement or owning your first home. Ask yourself
which will make you the most happy and give you a sense of peace.

                                              Dig in to the details!

Now is when you get into the specifics. First, list your goals with the most important at the top and the
least important at the bottom. Next, it‘s time to get more specific with your goals. Instead of just listing
retirement as a goal, give it a number by writing down how much money you want to have in your
retirement account.

Finally, all good goals have a time limit. Give yourself a specific time limit to reach the goal. If you‘re 40
years old, then you might give yourself 20 years to reach your retirement goal. Do this for each goal you
wrote down. Here‘s a short example:

   1. Retirement – Have $820,000 in retirement fund by age 60.
   2. College funding – Save $25,000 in eight years for daughter‘s tuition.
   3. Dream house – Build our $300,000 dream home in next 20 years.

                                                  The Main Tip

Your job as an investor is to determine in clear and simple terms what your short- and long-term goals
are. Remember, it‘s your money, so be intentional. Once you have your list of goals, sit down with a
trusted investing professional to help you further prioritize and reach your goals.

                       Social Insecurity: Don't Rely on the Government

Washington recently announced that, for the first time since 1975, there will be no cost-of-living
adjustment for more than 50 million Social Security recipients in 2010. This is just another sign that
the system is mathematically doomed and shouldn't be counted on to fund you at retirement.

It's bad enough that there is no cost-of-living adjustment, but even if there were, we are only talking about
a few dollars a month. If that changes your world, then you're broke. If you have money saved, then you
don't have anything to worry about.

The average monthly payout that a Social Security recipient gets is $1,094. For someone who probably
wants to spend their golden years traveling, playing with grandkids, and giving away money, that's a sad
number. If you rely on Social Security for your retirement, you'll be living small. You'll be at the mercy
of the government, which doesn't know how to handle money, and a program that is running out of
money fast.

You don't want to be in that position. It's up to you, not the government, to make your retirement great.
You need to live on less than you make, get out of debt, and keep some of your hard-earned money.

There is good news: When something this important is at stake, you'll do the best job you can to make
sure it works for you. There is no limit to how well you can set yourself up financially. With discipline
and self-control, you really can live like no one else when you retire. It's time to create your own

                    Things You Should and Shouldn’t Do Once You Retire
As you run your final sprint toward the finish line of retirement, you may discover that for all your
experience in running the race, you‘re not sure what to do once the race is done.

                               Do You Need To Change Your Investments?

No. If you‘ve invested in good mutual funds—divided equally between international, growth, growth and
income, and aggressive growth funds—then leave your investments as they are. Average life expectancy
after retirement is 15–20 years—long enough for your investments to continue building wealth for you
and your heirs.

Even if your investments are going down, don’t worry. You have quality investments with long track
records. They will come back—just like they did the last time you considered bailing. Besides, you don‘t
need your whole nest egg at once. You just need some of the income from it. (See below). If you must
make a change, you can invest less in your aggressive growth funds and more in balanced funds for a
more conservative option.

                        How Can You Make Sure Your Retirement Funds Last?

As long as you didn‘t take the ready-fire-aim approach to retirement planning, you should already know
how to make retirement last. But, here‘s a refresher:

You‘re going to keep your nest egg invested and averaging 12% growth. We‘re estimating inflation at
4%. So, to maintain your nest egg and break even with inflation, you will live on 8% income from your
nest egg. That means if you have a nest egg of $625,000, you will live on $50,000 per year: $625,000 x
8% (.08) = $50,000.

                      What About Giving and Leaving A Legacy For Your Family?

Most people who achieve financial success are givers, so you probably already know that giving is the
most fun you‘ll have with money. Now‘s your chance to give like no one else, and there‘s no shortage of
opportunities. Start by tithing (or continuing to tithe) to your church, and then give where you‘re led.

                                                  The Tip

There’s no need to overthink your retirement. If you’ve planned well and invested well, you’re now in a
position to enjoy what you’ve worked for—even blessing others while you’re at it!

                       Three Steps to Wealth Building for Young Adults

A study by the University of Michigan‘s Institute for Social Research found that the median household
net worth of people in their 20s fell by nearly 30% from 2003 to 2005.

Larry Burkett used to say we spend the first five to seven years of our marriage trying to attain the same
standard of living as our parents. It only took them 35 years to get there.

Married or single, 20-somethings are doing the same thing. Everyone tells them renting is bad so they buy
a house plus furniture, a big screen television and stereo surround sound.

It is human nature to want stuff and want it now; it is also a sign of immaturity. Being willing to delay
pleasure for a greater result is a sign of maturity. However, our culture teaches us to live for the now. ―I
want it!‖ we scream, and we can get it if we are willing to go into debt. Debt is a means to obtain the ―I
want its‖ before we can afford them.

Debt is so ingrained into our culture that most Americans can‘t even envision a car without a payment, a
house without a mortgage, a student without a loan, and credit without a card. But debt adds considerable
risk and isn‘t used by wealthy people nearly as much as we are led to believe.

The Forbes 400 is a list of the richest 400 people in America as rated by Forbes magazine. When
surveyed, 75% of the Forbes 400 (rich people, not your broke brother-in-law with an opinion) said the
best way to build wealth is to become and stay debt-free. So how do you get started?

                                         Do a budget and stick to it.

A budget is not a torture device—it‘s you telling your money what to do instead of wondering where it
went. Most people who call my radio show say doing a budget is like getting a raise. A budget doesn‘t
mean you can‘t have stuff—I want you to get some stuff—but save up so you can pay cash.

                     Save for emergencies so you don’t have to rely on credit cards.

First save $1,000 to cover small emergencies, like flat tires and medical co-pays, while you get out of
debt. That way when little unexpected things happen, you won’t have to reach for the credit card and
go further into debt to cover it. Once you are debt free, save three to six months of expenses for a fully
funded emergency fund to cover larger emergencies like job layoffs and unexpected pregnancies.

                                        Get out of debt and stay out.

According to USA Today, the average college senior graduated in 2006 with more than $19,000 in debt.
That‘s a lot of debt for someone just starting out! Instead of only making minimum payments and letting
the debt escalate—get crazy and knock out the debt as fast as you can. If you didn‘t have a car payment, a
student loan, credit cards out your ears, medical debt, or even a mortgage, you could become wealthy
very quickly.

                 Important Update from Dave Ramsey About the Economy

In light of the roller-coaster economy over the past year, many people have asked if Dave has changed his
views on anything or rewritten any of his fundamental teaching principles. The short answer is, ―NO

Dave‘s teaching principles aren‘t based on month-to-month shifts in the economy. What he teaches is
nothing new; it‘s just God‘s and Grandma‘s ways of handling money. These are timeless truths that
don’t change, regardless of how the market performs. So, let‘s take a look at a few specific areas that
we‘ve been getting a lot of questions about.


Dave has said time and again that most people who get into trouble with their investments are those who
try to time the market. That is, they put their money in, take it out, move it around and mess with it!
That‘s a HUGE mistake! You should keep investing in both good and bad times.

A full 100% of 15-year periods in the stock market‘s history have made money. That‘s 100%! Like Dave
says, you don‘t get hurt on a roller coaster unless you jump off!

In July of 2009, the Dow Jones increased 8.6%. That‘s the best July performance in a decade! And the
S&P 500, a listing of the 500 largest companies in America, was up 7.4% in July 2009. That‘s the best
July performance for the S&P since 1997. Not only that, but it‘s up 34% since March 2009! If you got
out of the market, you missed the growth!

                                                 Real Estate

Yes, foreclosures have been up lately. A lot of families who bought their homes with nothing down or
stupid interest-only loans got stuck in a bad market and are losing their shirts. For a while this spring, it
seemed like all the news media talked about was how bad housing was in America. But here‘s the truth:
60% of the foreclosures occurred in only five states—Nevada, Florida, Arizona, California and

Dave firmly believes that real estate will be the area that leads us out of the recession. It‘s happened
before, and it will likely happen again. One of the reasons is pent-up demand. Even though it‘s a hard
time to sell a house, people are still moving. They get transferred in their jobs or take a new job in a
different city or need to move home to take care of their families. Life doesn‘t stop happening when the
housing market takes a hit.

The housing market is flooded with inventory right now, which has kept prices low. However, the cost of
new houses really hasn‘t changed much, because the cost of construction materials hasn‘t changed. So, as
the available inventory starts to burn off, prices will start to go back up because they‘ll have to compete
with the higher new home prices.

                                           Manual Underwriting

If you do the things Dave teaches, like getting out of debt and cutting up your credit cards for good, your
credit score will eventually drop to zero and become what‘s called ―indeterminable.‖

The thing is, though, most mortgage lenders use only your credit score to determine whether or not to
give you the home loan. They don‘t really look at you at all; they just care about your three-digit FICO
score. So, if you don’t have a credit score because you‘ve gotten your financial act together, these lazy
lenders can‘t—or won’t—help you.

In that case, you‘ll need to see a lender who does manual underwriting. These mortgage lenders actually
take the time to see who you are, what you do, what your current financial position is and more. Our
friends at Churchill Mortgage assure us that manual underwriting is still alive and well, and they‘re
approving these mortgages at A+ rates every week.

                                                 So What?

If the economic downturn made you pay attention to your money for the first time in your life, then that‘s
a blessing—even if it came with some pain. Pain is like that, you know. It can be helpful and instructive.
It shows us where we‘ve gone off track and points us back in the right direction. That‘s always a good

So don‘t be afraid of the pain. Face it. Deal with it. See what it‘s showing you. Correct the problems it is
highlighting in your life. Clean up the messes it is uncovering. The economy won‘t be bad forever. Make
this the year you turn your life around.

                                 Plan Now for Your Golden Years

One of the scariest things you can experience happens when you start closing in on retirement age and
realize that you have not saved up enough money.

Many thoughts start to race through your mind: Will I have enough to take care of myself? Will I have the
chance to do the fun things that I'm supposed to be able to do at retirement? Will I really have to buy the
book 72 Ways to Prepare Alpo and Love It?

If this is you, don't panic. You still have some time to get things in order. It might mean that you won't be
able to retire at age 65, but if you start this instant and focus on getting ready for your golden years,
then there will still be some gold in them.

                                                   Step 1

First, sit down tonight and write out your money situation. List your income, the debts you have, and any
savings you've built up. Get on a budget and spend every dollar you make on paper before the month
begins. If you don't know where your money is going each month and feel like you have no control, then
this is the best way to get control. Get Dave's free budgeting forms here.

                                                   Step 2

Once you have listed your income, debts and savings, look for ways to trim the budget. If you have car
loans or rental properties, then selling these to get rid of the debt is the quickest way to improve your
situation. If you are driving a $25,000 car and the payments are $500 a month, then sell it and get a
$3,000 beater car. You may not like the idea of going from a nice car to a not-so-nice car, but you'll like
the idea of retiring with no money and lots of debt even less. Plus, when you get rid of a $500 monthly
payment, you'll feel much better.

                                                   Step 3

Once you've found ways to amputate your lifestyle (don't forget to cut unnecessary expenses out of the
budget to free up more cash), start working the Baby Steps. Save $1,000 for a starter emergency fund
quickly. Then start on your debt snowball and pay off your debts smallest to largest. Once you're debt free
except for the house, finish off your emergency fund (3-6 months of expenses).

                                                   Step 4

Now comes the part you've been wringing your hands over. Start putting 15% of your pre-tax income into
retirement. If your company matches your 401(k) contributions, contribute just enough to get the full
match. Next, fully fund a Roth IRA (or two, if you're married). If you're 50 or older, you can put in some
extra "catch up" money (an extra $1,000 per year). Get to this step as fast as you can so you can invest
and let the compound interest work for you. If you invest $5,000 a year in a Roth IRA from age 55 to 68,
you'll have $181,000. But if you can get to Baby Step 4 by age 52 and start then, you'll have $273,000,
tax-free at age 68!

To boot, the sooner you can get to Baby Step 6 and pay off the house, the quicker you can put the house
payment into a mutual fund and have even more money. Don't wait, and don't lose hope. Get "gazelle
intense" now so you can enjoy your retirement later!

                             Three Retirement Tips for Late Starters
                                      from daveramsey.com on 03 Aug 2009

Are you are one of the millions of people who realized you started saving for retirement about 20 years
too late? If so, don't lose your head and start freaking out. Here are three tips to help you.

Downsize your lifestyle. It's a safe bet that you'll need about 85% of what you earned before retirement
after you leave your job. If you buy that $5 latte every morning or always wear the expensive, name-brand
clothing, I'm talking to you. It's time to get "gazelle intense" about paying off all your debts and living on
less than you make.

Put off retirement for two more years. The more you work, the more you save. According to the Center
for Retirement Research at Boston College, most people that work just 2 more years past retirement age
can lower the amount of savings needed by about 25%. Plus, the extra income won't hurt anything!

Start investing in mutual funds. If you're 40 and have zero dollars in your retirement account, don't give
up yet! By saving just $2,000 a year in a mutual fund earning 12%, you will have $333,866 by age 65 or
$428,714 if you wait till age 67! While you won't have the most luxurious retirement, you can draw a
decent yearly income from the interest by leaving that money alone. That's roughly $48,000 a year!

If you're a late starter, you need to get moving right now because time is your biggest enemy!

Now is the time to get in touch with the investing professional in your town who Dave recommends to get
you started investing or to maximize what you already have. These professionals have been interviewed
many times to make sure they give the absolute best advice. You can find them here:


                                              Roth IRA 101
                                            from daveramsey.com

Too many people claim they want to invest for their future but do nothing about it. There's a big
difference between just thinking about something and actually doing it. Many people think investing is
too confusing, but in reality it isn't. Learning the basic rules of investing and taking the proper steps
forward can lead to wealth and security (which is what you want, right?).

The best way to start investing is with a Roth IRA. If you have no clue what this is or always get
confused when you hear an investing term, this is just for you. There are no big words here you can't
understand. A Roth IRA is simply:

      A retirement savings account that grows TAX FREE!
      You won't pay taxes as you let the money accumulate or when you cash it out at retirement. Did
       you get that? It grows TAX FREE!
      Perfect account for young people because it adds up in the long run.
      Extremely flexible. You can invest in mutual funds, bonds or real estate.

                                             Roth IRA Rules:

   1. You can only contribute the maximum amount each year. This year you can put up to $5,000 in
      the account.
   2. You can only contribute to a Roth IRA if you earn an income or if you're married to someone that
      earns an income. So don't even think about opening up a Roth in your eight-year-old child's name
      and contribute more of your money. (If you want to save money for your child's future, look into a
      529 plan or ESA account.)
   3. If you are single and make less than $99,000, you can invest the max amount each year. For
      married couples, you must make less than $156,000 combined to be able to contribute to the Roth
      IRA. If your income is over these amounts, look into a traditional IRA.

Although you can pull your money out of a Roth IRA in certain circumstances, Dave doesn't recommend
doing this. If you pull the money out before you hit age 59 and a half, you will most likely face fees for
taking it out early. Therefore, make sure you can afford to invest in a Roth IRA.

The easiest way to do this is to have a set amount withdrawn from your bank account and put into your
Roth IRA each month. This works best because you won't even feel like you're missing the money since
you never saw it to begin with. Basically, put the money in and forget about it. It's very simple to set
one up.

                          How to Survive the Roller Coaster Economy

I know that the recent media coverage about the economy scares investors. The smartest thing you can do
right now is hold on to your investments. Do not cash them out. That's what I'm doing. I have a lot of
money invested in the American economy through growth stock mutual funds. But you know what? I'm
not touching those funds. I'm riding this market roller coaster to the very end.


Well, people who make money in the stock market are the ones who think long-term and don't jump in
and out based on the market fluctuations. Market timing is trying to predict when to add or withdraw
your money in the market; historically, it doesn't work. After all, the only way to get hurt on a roller
coaster is to jump off!

However, staying invested ensures that my investments won't miss those best-performing days. And
guess what: if you missed just 10 of the stock market's best-performing days over the past 20 years, you
would have lost tens of thousands of dollars! I honestly believe that 10 years from today, you'll look like
a genius if you hold on to your current mutual funds!

But Dave, I'm almost old enough to retire. Should I cash out?

Nope. I understand you're scared, but think this through. If you're under 59 and a half years old and cash
out your 401(k), you're going to face penalties and pay Uncle Sam a lot of tax!

When it's all said and done, you'll take a bigger hit on your money by cashing out than any drop in
the stock market cause. So, even if you want to retire, you're better off leaving your 401(k) or IRA

Keep thinking long term. That's what I'm doing. I'm not cashing out. I believe the market and my mutual
funds will be okay. And 10 years from now, it will have been a great decision.

                                           Proper Investing

Investing money takes time and patience, but the rewards are tremendous and long-lasting. By saving
money long-term and preparing for life after your career is over, you'll really put the "golden" in golden
years. There are some things that you must know about investing if you want to make the most of your
money and time.

                                              Save or Invest?

Five years is the benchmark to use to determine whether to save or invest. There is a difference. Saving
is more short-term, while investing is long-term. For example, if you are planning to buy a car soon, you'll
want to save a pre-planned amount each month in a basic savings account. You're just looking for a safe
place to put the money, so don't worry about earning interest. After several months, you can go buy the
car (look for a good bargain and use the power of cash to get a discount).

On the other hand, if you have a five-year-old child and want to start saving for his or her college fund,
then you want to invest. If you are planning to retire in 25 or 30 years, you would invest money, rather
than just save it. In terms of investing, put your money in good growth-stock mutual funds with at least
10-year track records. Put 25% of your money each in growth, growth and income, aggressive growth and
international funds.

                                            Why Invest Now?

The reason that you invest your money when you have a lot of time is just that: time. Over any given five-
year period, 97% of the mutual funds on the market make money. Not only that, but the stock market
has averaged a growth rate of 12% per year over the last 70+ years. Not only is time on your side when it
comes to investing, but solid performance by the market is as well.

That doesn't mean a solid growth curve of 12% each year is guaranteed. It means one year the market
might grow 7%, the next year 10%, and the next year 19%. That comes out to 12% per year, and since
you leave money in an investment for several years or even decades, then you come out a winner there.

                                            A Prime Example

Let's look at an example. If you want to retire at age 65 and start investing just $200 a month at age 45,
you'll end up with about $193,000. That won't cut it if you're going to spend 20 or 30 years in retirement
and expect to live off the interest. If you begin investing that same amount at age 35, you'll have almost
$649,000. Better, but probably not good enough. If you start at 25, though, you'll finish with over $2
million! You'll be able to retire with dignity, give money like you've never given before, have serious
fun, and leave a huge blessing to your spouse and children.

You get out of investing what you put into it. The sooner you complete the first three Baby Steps, the
more time you have to grow your money, and the bigger the payoff will be. When you get to Baby Step 4
and start investing 15% of your income, over time the interest you earn just goes nuts! Use that as
motivation to drill through your Baby Steps and get to investing and serious wealth-building!

                                   The Stock Market Will Rebound

History proves we‘re going to make it through this recession.

Bear markets—when stock prices decline by 20% or more over at least two consecutive months—are no
fun, but they have historically set up the market to bounce back and surpass its previous highs. And it
might happen sooner than you think it will. Just look at the past bear markets the stock market has

If you cashed out your investments during one of those bear markets, you would have missed out on about
a 50% gain. That‘s a lot of money! So what does history teach us?

   1. Don’t cash out your investments during a bear market. If you do, you may lock in the losses and
      miss the rebound of the stock market.

   2. Never give up hope. This recession and the bear market will end. You and your investments will
      be stronger in the long run.

                      Retirement Planning: Yourself vs. a Professional?
                                            From: daveramsey.com

When it comes to retirement planning, you have lots of options. But all the funds, numbers and interest
rates can be overwhelming at times. Should you call on the services of an investment professional, or
invest on your own?

Dave always leans toward hiring a pro for anything important. Hiring the right professional to do an
important job will save you time, money and stress. Investing on your own may save you a little money
at first but can cost you in the long run. Here are some situations and solutions to help you decide which
option is best for you:

Choosing your 401(k) funds
Most 401(k)s limit you to around a dozen choices, so this decision shouldn‘t be too complex.
Solution: You may be able to make these choices on your own. However, if you want to be thorough,
consider getting an investment professional’s opinion.

Choosing funds for your IRAs
There are thousands of mutual funds available for your IRA, and there are different types of IRAs. If you
don‘t want to take the time to research them all, then you should avoid flying solo.
Solution: Get a pro to do the research, find the funds that fit your goals and explain how different types of
IRAs will affect your retirement goals.

Rolling over a 401(k)
If you left a previous job and took part in your former company‘s 401(k), you should move the leftover
money into an IRA. You have thousands of options to choose from, which is overwhelming for most
Solution: Get an investing professional to help you roll over any 401(k)s from previous employers to an
IRA. A pro will also help you choose the best funds.

Estate planning
Estate planning involves retirement planning, minimizing taxes, distributing money to loved ones, money
management after death and much more. This can get complex.
Solution: Even rocket scientists use investing professionals to do their estate planning. You should do the
same to save yourself many headaches.

Your Next Step
If you think investing by yourself is the right choice, you‘ll have no trouble finding do-it-yourself
services. However, if your situation requires an investing pro's help, make sure you get someone who is
reliable and trustworthy. Dave recommends that you talk with one of his Investing Endorsed Local
Providers (ELP) who are certified professionals with the heart of a teacher. They‘ll help you build wealth
even during today‘s economic slump.

                    Three Mistakes That Can Sabotage Your Retirement
Saving for retirement is easier than you may think. It‘s more of an exercise in behavior than head
knowledge. That means anyone can save for retirement. All it takes is a little determination and
discipline. Unfortunately, in our I-want-it-now culture, discipline seems to be running quite low.

You‘re jeopardizing your future if you have a habit of:

                                              Staying in debt

Debt does not help you build wealth for retirement, nor does it save you money. Debt is not a tool that can
build prosperity. Every day that you‘re in debt is a day that you sabotage your retirement.

If you want to be rich when you retire, then do what rich people do. According to Forbes magazine, most
rich people agree that the best way to build wealth is to become and stay debt-free. If you haven‘t yet
begun your Total Money Makeover, start now!

                                          Forgetting about taxes

Some people mistakenly assume that their retirement account is all theirs; Uncle Sam can‘t lay a finger on
it. That‘s not entirely true.

Unless you have a Roth IRA or a Roth 401(k), you will pay taxes on the money you withdraw from your
account when you retire. Therefore, your retirement account can easily be 25–30% less than you‘re

                                              Failing to plan

Many people assume that if they simply make a monthly deposit into their 401(k) or IRA, they‘ll be able
to retire with dignity. They don‘t really have a true plan. These people are playing a risky game of roulette
with their retirement.

Even if you‘ve done the math and know that your family should have $2 million for retirement if you save
a certain amount each month, that‘s still just half a plan. What if one of you isn‘t around next year?

Reliable retirement planning prepares for all the risks in life. From making sure you‘ve got term life
insurance to having long-term care at the appropriate age, you need a plan for it all. That‘s why using a
professional investment planner is such a great idea. Not only do they help pick the best funds for your
situation, they also prepare you for all the risks you don‘t even know exist. Even Dave uses a professional
investment planner!

                                      How to Avoid These Mistakes

Getting out of debt is up to you; follow Dave‘s first three Baby Steps to find out how it‘s done. To help
overcome the last two mistakes, Dave recommends you use a local, professional investment planner that
has the heart of a teacher. We call them our Endorsed Local Providers (ELPs). You can find one here:

                                         Thoughts on Investing

Everyone's talking about investing in single stocks, bonds, fixed annuities—and especially gold, all
because mutual funds aren't performing as well as they have been. Remember that just because something
is all the rage doesn't mean it's good.

One of the best investing rules to remember is to only invest in something that has a good long-term
track record. Who cares how much money you earn in interest in one year! Focus on the 20- or 50-year
track record. Gold's long-term track record is crummy—the average lifetime annual growth of gold is
only 2.14%. All of the money made by investing in gold has been since 2001.

In Jeremy Siegel's book Stocks for the Long Run, he reveals what would have happened to a single dollar
invested in bonds, stocks and gold since 1801:

       One dollar invested in bonds in 1801 would yield $13,975 today.
       One dollar invested in stocks in 1801 would be worth $8.8 million today.
       One dollar invested in gold in 1801 would be worth $14 today.

"In times of financial stress, in times of inflation, when there is fear for the [currency], gold does well,"
Siegel said. "Once the fears are past, gold goes back down." Why would you want to buy it at its peak

Many people think if the stock market collapses, we will use gold to buy things and survive. This is
insane! Remember the aftermath of Hurricane Katrina. People bartered with essential commodities. They
could not have cared less about gold.

Gold is a volatile, precious metal—it's flighty and can fluctuate sharply. You're much better off owning
mutual funds and paid-for real estate. If you are beyond Baby Step 3 and want some gold, just save up
and buy yourself a gold watch!

Just because we're in a bear market doesn't mean the stock market is on its way to collapsing! In order for
the stock market to crash, companies like Microsoft, Ford, GM, Home Depot, GE and Whirlpool have to
close their doors for good. Can you honestly imagine all of those companies closing? Our stock market
operates differently now than in 1929; there are many more safeguards now. The people who predict stuff
like this are doomsayers.

The best way to invest is to put your money in growth stock mutual funds that have good long-term
track records. This is what I do. The stock market has averaged a growth rate of about 12% per year over
the last 70+ years. That doesn't mean a solid growth curve of 12% each year is guaranteed. It means one
year the market might grow 7%, the next year 10%, and the next year 19%. That comes out to 12% per
year. Since you leave money in an investment for several years or even decades, odds are extremely high
that you'll come out a winner!

                                          Millionaire Secrets

When we think of millionaires, we envision the lifestyle of a Hollywood movie star. We think of big
houses, fancy cars, and "champagne wishes and caviar dreams."

But here's the secret few people know: Most millionaires don't live a Hollywood lifestyle. Most
millionaires are people just like you who work hard, don't live in fancy houses, and drive used cars. In
fact, you never would guess that they were millionaires.

It's true. A research study conducted by Dr. Thomas Stanley and Dr. William Danko revealed this fact in
their book, The Millionaire Next Door. The findings by the two researchers support what I've said for
years: your biggest wealth-building tool is your income. It almost sounds too simple, but it's absolutely

Right now you might be saying to yourself, I work hard and have a steady income. Why am I not a
millionaire? The answer might be that you spend more than you make. If that's true, you're essentially
giving your money to someone else so they can become rich while you live paycheck to paycheck. If you
want to be a millionaire, you need to change your lifestyle to mimic most millionaires.

                                 The lifestyle of the average millionaire

Most millionaires live well below their means. They don't worry about driving the nicest cars or living in
the biggest houses. They believe that true financial independence is more important than showing off their
social status. What does that mean to you? It means you must get out of debt and stay out of debt!

But they don't stop there. Most millionaires also plan the routes their money will take. They spend a lot
of time, energy, and money toward budgeting, saving and investing. They set financial goals, make
detailed plans to reach those goals, and never give up.

                                   How you can become a millionaire

Did you take special notice that most millionaires invest their money? It's not enough to live below your
means and save money; you must invest that money. Dave recommends you invest in mutual funds
because they offer several advantages over individual stocks. Here's a quick breakdown of my suggested

      25% in a growth mutual fund
      25% in a growth and income mutual fund
      25% in an aggressive growth mutual fund (or balanced fund for those with low risk tolerance)
      25% in an international mutual fund

                                   Alleviate the Risk of Investing
If you want to achieve a high goal, you're going to have to take some chances. —Alberto Salazar

Most people want to be wealthy, but not everyone is willing to do what it takes. What's the cause behind
this fear of building wealth? The answer is risk.

It's true. Investing your money is risky. There are two risks when it comes to investing. The first is that
your investment may go down in value. The second is that it might not grow enough to keep up with the
rise in the cost of daily living (inflation). Your investments need to increase in value enough to cover the
rise in cost of everything as well as taxes. Yes, there is risk in everything. But that doesn't mean you
cannot do anything about it.

Alleviate your risk by:

      Diversifying your investments
      Investing in mutual funds that have a successful track record of 5-10 years
      Getting the advice of a sound investment professional

That last point could be the most important. Always seek the advice of an investment professional who
takes the time to help you understand your investments and will not sell you any funds that will not help
you meet your goals. According to Dave, "A good investing agent not only helps lower your risk but can
make you feel downright good about your investment."

                                       Keep At It and Cash In
                                            Source: Business Week

You probably don't know the name David Tepper. He's the guy who made $6.5 billion last year.
―What?!‖ you may ask. Yep, it happened!

Tepper is the founder and president of Appaloosa Management, a hedge fund based in New Jersey. Last
year, while the rest of the country was panicking about the stock market going crazy, real estate crashing,
and the news media screaming that we're all going to die, he was looking for deals. And finding them.
Lots of them.

He started buying stocks. He bought bank-related securities, as well as bonds for five cents on the dollar.
He even purchased shares of Citigroup and Bank of America when the government started to buy them.
Because he researched the situation and paid attention to what was happening (clue!), he knew the banks
would not be nationalized.

And then what happened? The market started to recover. Assets that he acquired were shooting up as
much as 330%. Months went by and the market kept rising. By the end of September 2009, Tepper found
his firm had gained $6.5 billion.

Here's the key, though: Tepper didn't buy into all the talk that we were headed for a second Great
Depression. The market was down, but he knew it wouldn't stay down (certainly not forever). He had the
wisdom to buy when prices were low and the patience to wait for recovery. When that would happen, no
one knew. But he knew it would.

The point of all this is not that you should buy single stocks and hope to hit the jackpot. The point is,
when you invest in good growth-stock mutual funds and paid-for real estate, you think long term and
don't panic when things look rough. They will recover, and you'll be much better off for waiting out the

No, you probably won't make several billions of dollars in the process. But if we're 1,000 times wrong,
and you only end up with a few million, could you live off of that?

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         Week 6 Reading Assignment
                  What to Do if You Lose Your Job

                      DISC Personality Profile

                         Job Hunting Tips

                         Dress for Success

                        Job Networking Tips

                       Letter of Introduction

                        Resume Cover Letter

                            Resume Tips

               Thank You Letter and Follow-up Letter


          Excerpts Taken From Our Work and Our Calling

                         Home Mortgages

             Cancellation of Private Mortgage Insurance

               So You Want to Start a Small Business

Home Equity Line of Credit and Home Equity Loans (Second Mortgages)

                   Looking for the Best Mortgage

                  Mortgage Shopping Work Sheet

                                What to Do if You Lose Your Job:
Here‘s a few tips I found on Dave Ramsey‘s message board written by an FPU member responding to
someone who had just lost their job. He had recently gone through a similar situation and some of his
suggestions came from his experience as well as having gone through Dave Ramsey‘s Financial Peace
University course.

1. Start using your emergency fund if necessary because this is an emergency.

2. Call your mortgage lender right away, inform them of your situation, and find out what options you
have and if there are any special assistance programs they might have to help you..

3. Use what money you have for the 4 walls – food on the table, shelter, keep the lights on, water running,
house warm, clothes when you need them.

4. Everything else goes on hold - credit cards, Christmas, everything!

5. Keep the budget to the bare minimum of absolute necessities (the 4 walls).

6. This is not the time to be proud - ask your church for help for Christmas, go to a food pantry for canned

7. Go apply for unemployment ASAP.

8. Temporarily pause from searching for part-time jobs, as it effects unemployment compensation rates
unless you can find one or more part-time jobs that pay more than all your unemployment benefits.
Consider finding part-time work that pays cash only, like doing odd jobs, mowing lawns, etc.

9. Check on eligibility for food stamps or any other assistance programs.

10. Get your resume updated. By the way, not all resumes are equal. Some people have tons of experience
& abilities, yet a very poorly written resume. Be able to identify this weakness if it exists and pay $50 to
have your resume re-written. Remember, you are marketing yourself, and things like this do matter!

11. Start networking. The bulk of jobs result in who you know, not necessarily what you know or how
well you can do it. Only about 15% of all available jobs are advertised.

12. Contact all your creditors and advise them about your new situation and ask for any special assistance
programs they may have. Use the pro rata plan to pay creditors during this time.

13. Alert your friends & family to your situation. Their support is needed right now. And a huge added
bonus is this plays on the networking part. If Uncle Bob knows you need a job, he may mention it to
Johnny and help you get an interview.

14. If you have kids, tell them. Then make sure everyone understands you are in "survival mode" right
now, which means only NECESSARY expenses can be incurred.

15. Adjust your budget accordingly. Kill the cable/satellite, remove texting/data plans from cell phones,
cut gym memberships and unnecessary subscriptions, keep the house a little cooler this winter, conserve
water & light usage, organize trips to town to maximize fuel savings, etc.

16. Look through the house and consider items you can sell to build your emergency fund.

17. Go to church and let your spiritual side heal. Lean on the pastor for advice & support as needed.

12. Keep job searching time somewhat limited. Nothing wrong with getting up early and starting. But
when it's 5-6pm, put it down and give it a rest. You need time w/ family and vice versa. (again, one of
those things I learned vs. doing)

13. Be there for your spouse.

                                       DISC Personality Profile
                         From: http://changingminds.org/explanations/preferences/disc.htm

                   Know thyself and to thine own self be true. – William Shakespeare

This is a popular system originating in the 1920's by an American psychologist called William Moulton
Marston. It measures four preferences, in which you are scored in each preference (thus resulting in a
profile score across each type).

The meanings of the DISC letters vary, according to whom you talk. Known variants are included in the
table below:

          DISC type                  Description
          Dominant (10%)
                                     Independent, persistent, direct.
          Lion                       Energetic, busy, fearless.
                                     Focus on own goals rather than people.
          (Direct, Driver,           Quick Decision maker. Problem solver – gets things done.
          Demanding,                 Tell rather than ask.
          Determined, Decisive,      Ask 'What?'
          Influential (25%)
                                   Social, persuasive, friendly.
                                   Energetic, busy, optimistic, distractible.
                                   Imaginative, focus on the new and future.
                                   Poor time managers. Focused on people rather than tasks.
          (Inducement, Inspiring,
                                   Tell rather than ask.
          Impressive, Interacting,
                                   Ask 'Who?'
          Steady (40%)            Consistent, likes stability.
                                  Accommodating, peace-seeking.
          Golden Retriever        Likes helping and supporting others. Good listeners and
          (Submissive, Stable,    Close relationships with few friends.
          Supportive, Shy, Status Ask, rather than tell.
          quo, Specialist)        Ask 'How?' and 'When?'
          Conscientious (25%)
          Beaver                     Slow and critical thinker, perfectionist.
                                     Logical, fact-based, organized, follows rules.
          (Cautious, Compliant,      Don't show feelings. Private. Few, but good friends.
          Correct, Calculating,      Big-picture, outlines.
          Concerned, Careful,        Ask 'Why?' and 'How?'

When compared to the Myers-Briggs Type Inventory, it is more behaviorally focused (Myers Briggs
focuses more on the thinking processes).


Just by looking closely at this, a number of preferences can be seen within the DISC types, including:

           Preference                   Dominant     Influential     Steady         Cautious
          Focus on other people                            X            X
          Independent, internal             X                                            X
          Energetic and busy                X              X
          Tell rather than ask (vs.
                                            X              X
          Imaginative, big-picture,
                                                           X                             X
          Like stability and
                                                                        X                X
          Like change (vs. stability)       X              X
          Task-oriented (vs.
                                            X                                            X
          Flexible to changing
                                                           X            X

The DISC can be simplified in a 2x2 grid:

                                                People-focused              Task-focused

               Active, Outgoing                  Influential                  Dominant

                Passive, Internal                  Steady                   Conscientious

So what?

Understand the DISC type. They are quite simple and thus easy to use. Then play to the person's
preferences and overall type.

With Dominant people

      Build respect to avoid conflict
      Focus on facts and ideas rather than the people
      Have evidence to support your argument
      Be quick, focused, and to the point
      Ask what not how
      Talk about how problems will hinder accomplishments
      Show them how they can succeed

With Influential people

      Be social and friendly with them, building the relationship
      Listen to them talk about their ideas
      Help them find ways to translate the talk into useful action
      Don‘t spend much time on the details
      Motivate them to follow through to complete tasks
      Recognize their accomplishments

With Steady people

      Be genuinely interest in them as a person
      Create a human working environment for them
      Give them time to adjust to change
      Clearly define goals for them and provide ongoing support
      Recognize and appreciate their achievements
      Avoid hurry and pressure
      Present new ideas carefully

With Conscientious people

      Warn them in time and generally avoid surprises
      Be prepared. Don't ad-lib with them if you can
      Be logical, accurate and use clear data
      Show how things fit into the bigger picture
      Be specific in disagreement and focus on the facts
      Be patient, persistent and diplomatic

The DISC Profile is a simple test that will yield tremendous insight into how you process decisions and
what your natural tendencies may be. It will help you understand what your unique personality is, and
what type of job you may be suited for.

      Dominance: People who score high in the intensity of the "D" styles factor are very active in
       dealing with problems and challenges, while low "D" scores are people who want to do more
       research before committing to a decision. High "D" people are described as demanding, forceful,
       egocentric, strong willed, driving, determined, ambitious, aggressive, and pioneering. Low D
       scores describe those who are conservative, low keyed, cooperative, calculating, undemanding,
       cautious, mild, agreeable, modest and peaceful.
      Influence: People with high "I" scores influence others through talking and activity and tend to be
       emotional. They are described as convincing, magnetic, political, enthusiastic, persuasive, warm,
       demonstrative, trusting, and optimistic. Those with low "I" scores influence more by data and
       facts, and not with feelings. They are described as reflective, factual, calculating, skeptical,
       logical, suspicious, matter of fact, pessimistic, and critical.

      Steadiness: People with high "S" styles scores want a steady pace, security, and do not like
       sudden change. High "S" individuals are calm, relaxed, patient, possessive, predictable, deliberate,
       stable, consistent, and tend to be unemotional and poker faced. Low "S" intensity scores are those
       who like change and variety. People with low "S" scores are described as restless, demonstrative,
       impatient, eager, or even impulsive.

      Conscientious: People with high "C" styles adhere to rules, regulations, and structure. They like
       to do quality work and do it right the first time. High "C" people are careful, cautious, exacting,
       neat, systematic, diplomatic, accurate, and tactful. Those with low "C" scores challenge the rules
       and want independence and are described as self-willed, stubborn, opinionated, unsystematic,
       arbitrary, and careless with details

For more information on the DISC Profile test, visit the following websites:




Or, do a self-evaluation based on the descriptions, preferences and characteristics given for each of the
DISC types and see if you can determine which type best describes you, or if you might fit between 2
types. Once you know what your personality and natural tendencies are, then you can go and be the
―animal‖ you were always meant to be!

―The master in the art of living makes little distinction between his work and his play, his labor and his
leisure, his mind and his body, his information and his recreation, his love and his religion. He hardly
knows which is which. He simply pursues his vision of excellence at whatever he does, leaving others to
decide whether he is working or playing. To him, he is always doing both.‖ – James Michener

                                              Job Hunting Tips

             From: http://money.cnn.com/2008/02/12/news/economy/job.hunting.fortune/index.htm

With the U.S. economy apparently getting ready to take one of its cyclical snoozes, employers are more
hesitant to take on new hires than they were even just three or four months ago - and the recent uptick in
unemployment means more competition for each opening. That doesn't mean you need to give up on the
idea of looking for a new job. In fact, if your company is going through a merger or seems likely to
announce layoffs, your best bet may be to start your job search right away.

What's different about job hunting during a slowdown? Sure, the fundamentals - a resume that highlights
your achievements and is easy to read, customized cover letters that succinctly tell why you're the best
candidate for a particular job, and diligent follow-up (including prompt and impeccable thank-you notes) -
never change.

But when the market's tough, you have to work harder at job hunting and be more flexible, say Annie
Stevens and Greg Gostanian, managing partners at Boston-based executive coaching firm ClearRock
(www.clearrock.com). They've come up with seven tips to help you get the job you want.

1. Request more face-to-face meetings. During boom times, it might be okay to rely on phone
conversations and e-mails with networking contacts and recruiters. But right now, "people need to have
more in-person meetings, in order to gather more information and make a better impression," says

2. Step up your job-search activity. "The sheer numbers of letters and phone calls also need to
increase," says Greg Gostanian. "Plan on making up to 40 phone calls a week, and sending out between
15 and 20 letters to prospective employers, recruiters, and others. It's important to keep quality in mind
when developing these contacts, but there's no question that part of this process is a numbers game. In a
slower economy, you need to better your odds by making more contacts."

3. Try to be as flexible as you can. With so much uncertainty in the air, employers may not be jumping
to offer you a full-time job at the salary you have in mind. Instead, they might propose contract or project
work, bringing you on-board part time, or hiring you full time at less than what you were hoping to earn.
If you can possibly afford to, at least for a few months, accept what they're offering, especially if it's at a
company where you see growth and the potential for bigger opportunities later. Once you have a foot in
the door, says Stevens, "show what you can do, and how you can help them achieve their goals."

4. Consider relocating. Job candidates who are willing to move are in even shorter supply than usual
these days - partly because tumbling real estate values in many places mean that relocating involves
selling a current residence at a bargain-basement price (in some cases, for less than is owed on it). But
being open to the idea of moving improves your chances for success, Gostanian notes. "When you expand
the geography where you're willing to live, you have a bigger playing field with more opportunities," he

5. Scour the hidden job market. "In good times, only about 20% of available positions are ever
advertised or posted. In a slower economy, even fewer jobs than that are publicly announced in any way,
because employers don't want to be inundated with resumes," Stevens says. So dig deeper into uncovering
unadvertised openings through networking, and by contacting potential employers directly. Whenever

possible, register on companies' web sites to receive e-mail updates about new openings that fit your
experience and skills.

6. Spend very little of your time on Internet job boards and help-wanted ads. It's fine to keep an eye
on the job boards and post your resume on job sites, especially niche sites that specialize in your industry
or your area of expertise. But don't fritter away too many hours online. "Fewer job openings mean more
people are chasing the same advertised and posted positions," notes Gostanian.

7. Take advantage of social networking sites. If you aren't already using web sites like LinkedIn,
Facebook, Friendster, and MySpace to re-connect with old acquaintances and make new ones, this would
be a good time to start.

As the name "social networking" implies, these sites aren't designed primarily to help people develop
professional contacts (except for LinkedIn, which is the most business-oriented of the bunch) - but, hey,
you never know. Besides, the sites can be fun. Between working harder at your current job and trying to
figure out where to go next, you could probably use a little fun, couldn't you?

                                           Dress for Success!
                          From: http://www.quintcareers.com/dress_for_success.html

It's probably one of the most overused phrases in job-hunting, but also one of the most underutilized by
job-seekers: dress for success. In job-hunting, first impressions are critical. Remember, you are marketing
a product -- yourself -- to a potential employer, and the first thing the employer sees when greeting you is
your attire; thus, you must make every effort to have the proper dress for the type of job you are seeking.
Will dressing properly get you the job? Of course not, but it will give you a competitive edge and a
positive first impression.

Should you be judged by what you wear? Perhaps not, but the reality is, of course, that you are judged.
Throughout the entire job-seeking process employers use short-cuts -- heuristics or rules of thumb -- to
save time. With cover letters, it's the opening paragraph and a quick scan of your qualifications. With
resumes, it is a quick scan of your accomplishments. With the job interview, it's how you're dressed that
sets the tone of the interview.

How should you dress? Dressing conservatively is always the safest route, but you should also try and do
a little investigating of your prospective employer so that what you wear to the interview makes you look
as though you fit in with the organization. If you overdress (which is rare but can happen) or under dress
(the more likely scenario), the potential employer may feel that you don't care enough about the job.

How do you find out what is the proper dress for a given job/company/industry? You can call the Human
Resources office where you are interviewing and simply ask. Or, you could visit the company's office to
retrieve an application or other company information and observe the attire current employees are wearing
-- though make sure you are not there on a "casual day" and misinterpret the dress code.

Finally, do you need to run out and spend a lot of money on clothes for interviewing? No, but you should
make sure you have at least two professional sets of attire. You'll need more than that, but depending on
your current financial condition, two is enough to get started and you can buy more once you have the job
or have more financial resources.

Hints for Dress for Success for Men and Women
Attention to details is crucial, so here are some tips for both men and women. Make sure you have:
     clean and polished conservative dress shoes
     well-groomed hairstyle
     cleaned and trimmed fingernails
     minimal cologne or perfume
     no visible body piercing beyond conservative ear piercings for women
     well-brushed teeth and fresh breath
     no gum, candy, or other objects in your mouth
     minimal jewelry
     no body odor

For additional tips on dress for women - http://www.quintcareers.com/dress_for_women.html
For additional tips on dress for men - http://www.quintcareers.com/dress_for_men.html

Finally, check your attire in the rest room just before your interview for a final check of your appearance -
- to make sure your tie is straight, your hair is combed, etc.

                                           Job Networking Tips
                     (by ResumeEdge.com - The Net's Premier Resume Writing and Editing Service)

                                 From: http://www.enetsc.com/JobSearchTips14.htm

Eight Networking Tips
While it would make the introverts, the meek, the shy, and the novices awfully happy if the newspaper
classifieds contained all job openings, that's simply not the case. In fact, some of the best jobs aren't listed
anywhere except in the mental catalogues of CEOs and managers.
So how do you apply for jobs that aren't advertised anywhere, that exist only in the seemingly inaccessible minds
of working America's movers and shakers? You meet people who might have insight into your job search. You talk
to people who know people who could help you out. You chat it up with strangers at parties. You cold-call
people you've read about in the newspaper. You write cordial letters to prominent community leaders. You
cultivate an arsenal of contacts. In short, you network.
Think about networking as a game, as a sport, as a personal challenge. Below are some strategies for success.

1. Brainstorm for Contacts.

Think of everyone who could possibly serve as a contact. Don't limit yourself to people who could clearly
help you out - friendly, accessible people in unrelated fields often have contacts they would be happy to
share with you. Also, people who, through either work or volunteer activities, have contact with a diverse
crowd can be extremely helpful. To get you started with your list, here are some suggestions:
Family friends                             Local politicians
Relatives                                    Journalists
Neighbors                                    Business executives
Professors                                   Non-profit directors
Alumni                                       Your physician
Former employees                             Your hair dresser
Former co-workers                            Prominent community members
Public relations officials                   Members of professional organizations

2. Where the Contacts Are - Tried and True Places to Network

Local alumni association                                   Conventions
Class reunions                                             Club meetings
Cocktail parties                                           Internet list-servs
Fundraisers                                                Volunteer opportunities
Business conferences                                       Continuing education classes

3. Be Prepared

Networking is a little like planning a political campaign. While it's essential that you are honest and
relaxed, you should not wing it. Just as politicians think about what they tactically need to accomplish,
convey, and gain when they make an appearance or give a speech, you should approach networking
opportunities with a game plan. Before you confidently and charmingly sashay into a business conference

room, a dinner party, or group event, do your homework. Find out who will be there, or do your best to
list who you think will probably be present. Then decide who you would most like to meet. When you
have your list of potential contacts, thoroughly research their work and their backgrounds and then make
up some questions and conversational statements that reflect your research. And finally, think critically
about what your goals are for your networking function. What information do you want to walk away
with? What do you want to convey to the people you meet? But, as is always true, it's important to be
flexible and to perceive opportunities you didn't plan to confront.

4. Networking Knows No Boundaries

Business conferences, informational interviews, college reunions, and cocktail parties are obvious
networking opportunities - you expect to walk away with a few business cards and some
recommendations for potential rolodex entries. But the reality is that invaluable contacts and enviable
opportunities often surprise us. Good networkers are flexible people who approach connection-making as
a fluid enterprise that extends far beyond hotel conference room walls. You never know who will step
onto the adjacent elliptical trainer at the gym; who will be parked behind you in an interminable grocery
store line; who will sit next to you on an airplane; or who will be under the hair dryer next to you at the
beauty salon. Don't let these opportunities pass you by. While it may have been sheer luck that you
bumped into an affable CEO, your savvy approach to networking can turn a banal exchange into a pivotal
moment in your career path. Always be ready to make a contact and exchange business cards. And
remember, don't hesitate to network someone who has no obvious connection to your ambitions: Your
new contact may be able to give you relevant names of his or her friends and colleagues.

5. Follow Up

After you meet with a contact, it is absolutely essential to write a thank you note. Tell your contact how
much he or she helped you, and refer to particularly helpful, specific advice. Everyone - even the most
high-level executive - likes to feel appreciated. In addition to immediate follow-up after a meeting or
conversation, keep in touch with your contacts. This way, they may think of you if an opportunity comes
up, and they will also be forthcoming with new advice. It's important to stay on their radar screens
without being imposing or invasive. And, of course, if you get that new job, be sure to tell them and thank
them again for their help.

6. What Goes Around Comes Around

If you want to be treated with respect, treat others with respect. If you want your phone calls and email
missives returned, call and write back to the people who contact you. If you want big-wigs to make time
for you, make yourself available to others whom you might be able to help out. It's that simple
The higher up you climb in the professional world, the more you'll find that everyone knows everyone
else. Thus, if you're impolite, curt, condescending, or disposed to burning bridges, you'll cultivate a
reputation that will serve as a constant obstacle. Remember - the people who seem little now will one day
be running companies and making decisions. If you treated them with kindness and respect when they
were green, they'll remember and return the favor later.

7. Make It Easy For Your Contacts

When you call, meet with, or write to a potential contact, make it as easy as possible for them to help you.
Explain what you specifically want, and ask detail-oriented questions.
For example, "I'm looking for jobs in arts administration. Do you know anyone who works at the Arts
Council? May I have their names and phone numbers? May I use your name when I introduce myself to
them?" Another entrée into a productive conversation is to solicit career tips and advice from your
contact. Most people love to talk about themselves. By asking for your contact to offer valuable insight
from his or her personal experiences and successes, he or she will feel important and respected. Who
doesn't like to feel like an expert?
Be sure to avoid making general demands, such as, "Do you know of any jobs that would be good for
me?" This sort of question is overwhelming and it puts an undue burden on your contact.

8. Stay Organized

Keep a record of your networking. Whether you do this in a Rolodex, in a notebook, or in a database file
on your computer, it's important to keep track of your contacts. Make sure your system has plenty of room
for contacts' names, addresses, phone numbers, companies, job titles, how you met them, and subsequent
conversations you've had with them.

                                         Letter of Introduction
                      From: http://www.ehow.com/how_2352038_write-letter-introduction-.html

While a cover letter is important for several careers, a letter of introduction is becoming more popular.
These letters of introduction will be for more creative jobs that require knowledge of the applicant's
personality as well as credentials. Many people who are searching for a job will submit a letter of
introduction to a company to inform management of their qualifications and find out about prospective
job openings.

After a few days, follow the letter of introduction with a résumé and cover letter. After your job interview,
immediately send a thank you note and follow-up with a phone call about a week later.

Step 1: Use a familiar contact. If you have an ―in‖ within that workplace, don't hesitate to use him. Make
sure to add the name and department where the person works.

Step 2: Let the reader know that you have some experience. Include any highlights that you want to
mention or what you have learned. Even if your work experience isn't relevant to the job you are applying
for, there are many ways to make connections that seem beneficial.

Step 3: Include your education. You worked for that education. Make sure your potential employer knows
about it. Relevant education should be the only thing you put on your letter of introduction. The rest of it
can be placed on your resume.

Step 4: Mention why you want to work for that particular place. Why is this employer on your list of
potential workplaces? Let the reader know what you have to gain and learn from them. This is a good way
for the reader to find out how much you know about the company. Before you seek employment
anywhere, it is important to have a basic knowledge of what the potential workplace is all about.

Step 5: State your intent. Let the reader know what you have to offer and what you plan on doing in that
environment. If you are seeking employment in the information technology department or if you are
looking for general office work, it is a good thing to tell the reader how you will benefit the company. If
they believe you are unable to provide excellent service, they will discard your letter without a second

Step 6: Conclude with a creative and respectful goodbye. This is just another way to stand out and show
your personality. A simple 'sincerely' is acceptable, but if you want to get more creative, the reader will
enjoy it.

Step 7: Keep the letter conversational. Inform the reader that you will be sending him/here a résumé and
cover letter in a few days. Let the reader know that you are more than just a letter. Always have a certain
level of professionalism, but show you are a unique individual. Don't be afraid to be yourself while
writing the letter. You will get more points for it.

Tips & Warnings: Have someone read your letter before it is sent to check your spelling, grammar, and
structure. If you feel better about it, have more than one person read it.

Keep it brief. The letter of introduction is only intended to get your foot in the door, so keep it short and

Don't repeat all the information on your resume. Come up with new points to mention.
                                          Résumé Cover Letter
                                  From: http://jobstar.org/tools/resume/cletters.php

Who Needs a Cover Letter? Everyone who sends out a resume does! Even if the cover letter never "came
up" in conversation or wasn't mentioned in an advertisement, it's expected that you will write one.

It is regarded as a sign of laziness (sorry about that) to send out a cover letter that is not tailored to the
specific company. In the days before word processors, you could maybe get away with it. Not anymore!

Yes, it adds to the wear and tear of looking for a job! But the good news is: the cover letter gives you
another chance to emphasize what you have to contribute to the company or organization. Don't give the
person screening the resumes a second to entertain the thought: "But how can this person help US?"
Your cover letter will answer that question in your own words. Your resume will also answer that
question but in a somewhat more rigid format.

What makes a Good Cover Letter?

No spelling or typing errors. Not even one.

Address it to the person who can hire you. Resumes sent to the personnel department have a tougher
time of it. If you can find out (through networking and researching) exactly who is making the hiring
decision, address the letter to that person. Be sure the name is spelled correctly and the title is correct. A
touch of formality is good too: address the person as "Mr.," "Ms.," "Mrs.," "Miss," "Dr.," or "Professor."
(Yes, life is complicated.)

Write it in your own words so that it sounds like you--not like something out of a book. Employers are
looking for knowledge, enthusiasm, focus.

Being "natural" makes many people nervous. And then even more nervous because they are trying to
avoid spelling errors and grammatical mistakes. If you need a little help with grammar (do they still teach
grammar?)--check out the classic work on simple writing, Strunk & White's Elements of Style, published
in 1918 and now online. A good place to begin is "Chapter 5: Words and Expressions Commonly

Show that you know something about the company and the industry. This is where your research
comes in. Don't go overboard--just make it clear that you didn't pick this company out of the phone book.
You know who they are, what they do and you have chosen them!

Use terms and phrases that are meaningful to the employer. (This is where your industry research and
networking come in.) If you are applying for an advertised position, use the requirements in the ad and put
them in BOLD type. For example: the ad says--

"2 years' experience processing magnetic media (cartridge, tape, disc); interface with benefit plan
design, contracts and claims; and business background with strong analytical & technical skills--
dBase, Excel, R&R, SQL."

Make sure your cover letter contains each of these requirements and shows how you measure up.

More tips from: http://www.rensselaer.edu/web/writingcenter/cover_letter.html

The preliminary application for a professional position generally consists of two documents: a cover letter
and a resume.

While the resume is a somewhat generic advertisement for yourself, the cover letter allows you to tailor
your application to each specific job. Although the thrust of your various letters may remain the same,
with the assorted text-processing options available at RPI—options that include find-and-replace and
merging capabilities—there is really no reason to have a single, generic cover letter.


Effective cover letters are constructed with close attention to:

Your cover letter and resume usually provide all the information which a prospective employer will use to
decide whether or not you will reach the next phase in the application process: the interview. While your
goal is an interview and, ultimately, a job offer, the more immediate purpose of your cover letter, in some
cases, may simply be to gain an attentive audience for your resume.

A cover letter provides, in a very real sense, an opportunity to let your prospective employer hear your
voice. It reflects your personality, your attention to detail, your communication skills, your enthusiasm,
your intellect, and your specific interest in the company to which you are sending the letter.

Therefore, cover letters should be tailored to each specific company you are applying to. You should
conduct enough research to know the interests, needs, values, and goals of each company, and your letters
should reflect that knowledge.

A cover letter should be addressed to the specific company and the specific individual who will process
your application. You can usually find this through research or simply by calling the company to find out
who you should address your letter to.

The letter should name the position for which you are applying and also make specific references to the
company. Indicate your knowledge of and interest in the work the company is currently doing, and your
qualification for the position. You want the reader to know:

      why you want to work at that specific company,
      why you fit with that company
      how you qualify for the position to which you applying

In addition to tailoring your application to a specific job with a specific company , the cover letter should

      highlight the most important and relevant accomplishments, skills, and experience listed in your
      point to the resume in some way (as detailed in the enclosed resume")
      request specific follow up, such as an interview.

A cover letter should be in paragraph form (save bulleted lists for your resume) with a conversational,
though formal, tone. The first paragraph should be brief, perhaps two or three sentences, stating

      what job you are applying for and how you learned about it
      any personal contacts you have in or with the company
      your general qualifications for the job.

The body of your letter should consist of one to three longer paragraphs in which you expand upon your
qualifications for the position. Pick out the most relevant qualifications listed in your resume and discuss
them in detail, demonstrating how your background and experience qualify you for the job. Be as specific
as possible, and refer the reader to your resume for additional details.

The concluding paragraph of your letter should request an interview (or some other response, as
appropriate). State where and when you can be reached, and express your willingness to come to an
interview or supply further information. Close by thanking your reader for his or her time and

Example: Cover Letter 1

34 Second Street
Troy, New York 12180
October 4, 2001

Ms. Gail Roberts
Recruiting Coordinator
Department DRR 1201
Database Corporation
Princeton, New Jersey 05876

Dear Ms. Roberts:

Your advertisement for software engineers in the January issue of the IEEE Spectrum caught my
attention. I was drawn to the ad by my strong interest in both software design and Database.

I have worked with a CALMA system in developing VLSI circuits, and I also have substantial experience
in the design of interactive CAD software. Because of this experience, I can make a direct and immediate
contribution to your department. I have enclosed a copy of my resume, which details my qualifications
and suggests how I might be of service to Database.

I would like very much to meet with you to discuss your open positions for software engineers. If you
wish to arrange an interview, please contact me at the above address or by telephone at (518) 271-9999.

Thank you for your time and consideration.

Sincerely yours,

Joseph Smith

                                              Résumé Tips
         From: http://jobstar.org/tools/resume/yana24.php and http://jobstar.org/tools/resume/yana.php

Yana Parker, master of the resume and author of a number of résumé guides has given JobStar permission
to share some of her best resume tips!

1. What IS a resume anyway?

   o A Resume is a MARKETING PIECE--not a "career obituary!"
   o 5 Key Concepts for Powerful, Effective Resumes

             1. Your resume is YOUR marketing tool, not a personnel document.
             2. It is about YOU the job hunter, not just about the jobs you've held.
             3. It focuses on your future, not your past.
             4. It emphasizes your accomplishments, not your past job duties or job
             5. It documents skills you enjoy using, not skills you used just because you had to

2.What's a resume ABOUT?

   o It's NOT about past jobs! IT'S ABOUT YOU, and how you performed in those past jobs--which
     predict how you might perform in a future job.

3. What's the FASTEST way to improve a resume?

   o Remove everything that starts with "responsibilities included ..." and replace it with on-the-job

4. What the COMMONEST MISTAKE made by resume writers?

   o Leaving out their Job Objective! (Equivalent to: Somebody knocks on your door. You open it and
     say, "Hello, what do you want?" They say, "Duh ...")

5. What are the basic steps in writing a good resume?

   o 10 Steps in Creating a Good Resume

           1. Decide on a job target (or "job objective") that can be stated in about 5 or 6 words.
              Anything beyond that is "fluff" and indicates lack of clarity and direction. An
              actual job title works best.
           2. Find out what skills, knowledge, and experience are needed to do that target job.
           3. Make a list of your 2, 3, or 4 strongest skills or abilities or knowledge that make
              you a good candidate for the target job.
           4. For each key skill, think of several accomplishments from your past work
              history that illustrate that skill.
           5. Describe each accomplishment in a simple, powerful, action statement that
              emphasizes the results that benefited your employer.

           6. Make a list of the primary jobs you've held, in chronological order. Include any
               unpaid work that fills a gap or that shows you have the skills for the job.
           7. Make a list of your training and education that's related to the new job you want.
           8. Choose a resume format that fits your situation--either chronological or
               functional. [Functional works best if you're changing fields; chronological works
               well if you're moving up in the same field.]
           9. Arrange your action statements according to the format you choose.
           10. Summarize your key points at the top of your resume.

6. HOW FAR BACK should you go in your Work History?

   o Far enough; and not TOO far. About 10 or 15 years is enough--UNLESS your "juiciest" work
     experience is from farther back.

7. Don't include "Hobbies" on a resume.

   o UNLESS the activity is somehow relevant to your job objective. OR it clearly reveals a
     characteristic that supports your job objective. (A hobby of Sky Diving (adventure, courage) might
     seem relevant to some job objectives (Security Guard?) but not to others.)

8. Don't include ethnic or religious affiliations (inviting pre-interview discrimination) UNLESS it
   SUPPORTS your job objective

   o For example, include "Association of Black Social Workers" IF you're applying for Director of
     Inner City Youth Programs. This example is fictitious.

9. Employers HATE parchment paper and pretentious brochure-folded resume "presentations."

   o They think they're phony, and toss them out.

10. Don't fold a laser-printed resume right along a line of text.

   o The "ink" could flake off along the fold.

11. Don't MYSTIFY the reader about your SEX; they'll go nuts til they know whether you're male or

   o And while they're worrying about that, they're NOT thinking about what you can do for them. So
     if your name is Lee or Robin or Pat or anything else not clearly male or female, use a Mr. or Ms.

12. What if you don't have any EXPERIENCE in the kind of work you want to do?

   o GET SOME! Find a place that will let you do some VOLUNTEER work right away. You only
     need a brief, concentrated period of volunteer training (for example, 1 day/week for a month) to
     have at least SOME experience to put on your resume.
   o Also, look at some of the volunteer work you've done in the past and see if any of THAT helps
     document some skills you'll need for your new job.

13. What if you have GAPS in your work experience?

   o You could start by LOOKING at it differently. If you were doing ANYTHING valuable (though
     unpaid) during those so-called "gaps," you could just insert THAT into the work-history section of
     your resume to fill the hole--for example: "2004-2005 Full-time parent" or "2002-2003 Maternity
     leave and family management" or "Travel and study," or "Full-time student," or, "Parenting plus
     community service."

14. What if you worked for only ONE employer for 20 or 30 years?

   o Then list separately each different position you held there, so your job progression within the
     company is more obvious.

15. What if you have a fragmented, scrambled-up work history, with lots of short-term jobs?

   o To minimize the job-hopper image, combine several similar jobs into one "chunk," for example:
   o 2003-2005 Secretary/receptionist - Jones Bakery; Micro Corp.; Carter Jewelers. Or,
     2004-2006 Waiter/Busboy - McDougal's Restaurant; Burger-King; Traders Coffee Shop.
   o ALSO you can just DROP some of the less-important or briefest jobs. But DON'T drop a job, even
     when it lasted a short time, if that was where you acquired important skills or experience.

16. Students can make their resume look neater by listing seasonal jobs very simply.

   o Use something such as "Spring 2006" or "Summer 2006" rather than 6/06 to 9/06. (The word
     "Spring" can be in very tiny letters, say 8-point in size.)

17. What if your job title doesn't reflect your actual level of responsibility?

   o When you list it on the resume, either REPLACE it with a more appropriate job title (say "Office
     Manager" instead of "Administrative Assistant" if that's more realistic) OR use "their" job title
     AND your fairer one together "Administrative Assistant (Office Manager)".

18. Got your degree from a different country?

   o You can say: "Degree equivalent to U.S. Bachelor's Degree in Economics; Tehran, Iran."

19. What if you don't quite have your degree or credentials yet?

   o You can say "Eligible for U.S. credentials," or "Graduate studies in Instructional Design, in
     progress," or "Masters Degree anticipated May, 2008."

20. What if you have several different job objectives you're working on at the same time?

   o Or you haven't narrowed it down yet to just one job target? Write a different resume for EACH
     different job target. A targeted resume is much, much stronger than a generic resume.

21. If you're over 40 or 50 or 60 and want to avoid age discrimination, remember that you DON'T have to
    present your ENTIRE work history!

   o You can simply label that part of your resume "Recent Work History" or "Relevant Work History"
     and then describe only the last 10 or 15 years of your experience.

(If something really important belongs in the distant past, here's what to do: at the end of your 10-15 year
work history, you can add a paragraph headed "Prior relevant experience" and simply refer to that ancient
job without mentioning dates.)

22. Can't decide whether to use a Chronological-style resume or a Functional one?

   o Choose the Chronological format if you're staying in the same field (especially if you've been
     upwardly-mobile). Choose a Functional format if you're changing fields, because a skills-oriented
     format shows off your transferable skills better and takes the focus off your old job-titles.

23. Want to impress an employer?

   o Fill your resume with "PAR" statements. PAR stands for Problem-Action-Results, in other
     words, first you state the problem that existed in your workplace, then you describe what YOU did
     about it, and finally you point out the beneficial results.

Here's an example:

   o "Transformed a disorganized, inefficient warehouse into a smooth-running operation by totally
     redesigning the layout; this saved the company $250,000 in recovered stock."

Another Example:

   o "Improved an engineering company's obsolete filing system by developing a simple but
     sophisticated functional-coding system. This saved time and money by recovering valuable,
     previously lost, project records."

24. What if you never had any "real" paid mainstream jobs - just self-employment or odd jobs?

   o Give yourself credit, and create an accurate, fair job-title for yourself. For example, "A&S Hauling
     & Cleaning (self-employed)" or "Household Repairman--Self-employed," or "Child-Care--Self-
     employed." Be sure to add "Customer references available on request" and then be prepared to
     provide some very good references of people you worked for.


                                           Sean M. Rosen
                                         1001 Fillmore Street
                                       San Francisco, CA 12345
                                           (123) 555-2345
Objective: Graphic Designer


   o   Experienced with design concepts for packaging and advertising.
   o   Photographer with skills in evaluating prints for reproduction.
   o   Familiar with print preparation and production.
   o   Understanding of video shooting and editing for television.
   o   Experience in Photoshop, QuarkXpress, Persuasion, FreeHandFile, PageMaker, Illustrator, Maker
       Pro, and MS Word.



   o Created consumer packaging using PMS and four-color processing; prepared designs for photo
   o Produced ad campaign strategies for a variety of products and services.
     - Designed thumbnails, roughs, and final comps for print advertising.
     - Wrote copy for television and print media.
   o Communicated corporate identity through design of logo and collateral.
   o Created mechanicals; proofed blue lines and color keys.
   o Used a wide range of typography to appeal to specific audiences.


   o   Photographed fashion and food compositions in studio settings.
   o   Developed portfolio of color landscape prints from across the U.S.
   o   Exhibited photos in two Bay Area locations.
   o   Won award in black and white community photo contest.
   o   Black and white darkroom and other technical experience.

                                        Relevant Work History
                                      (Concurrent with Education)

   o 2005-pres.      Freelance Computer Graphic Designer, San Francisco
   o 2004-2006       Marketing & Graphics Assistant, Smith & Co., San Francisco


   o   B.F.A., Graphic Design & Marketing, anticipated Spring 2007
   o   San Francisco Art Institute, San Francisco, CA
   o   Marketing Program, summer 2005
   o   Emory University, Atlanta, GA

                                       — Portfolio Available —
                              Thank You Letter and Follow-up Letter
  From: http://www.damngood.com./ready/exmpl/thank-you.html and http://www.damngood.com./ready/exmpl/follow-up.html

After a job interview there are several ways you can keep the potential employer's attention on YOU as
the likely person to hire:

1. Immediately write a Thank You Letter to the interviewer. Write it right after the interview, and get it in
the mail the same evening so it arrives in the next day or two. Below is a Guideline and a Sample Thank
You Letter. Note: Send a Follow Up Letter soon after that, if you do not hear from the interviewer within,
say, a week---or whatever length of time seems reasonable, given how long they said it would take to
make a decision. Obviously, you'd want the Follow Up Letter to arrive DURING---not after!--- the
decision-making period.

In the first paragraph, thank the interviewer (or express your appreciation) for the chance to meet with
them to discuss the job and see the premises (use the term "meeting" rather than "interview" if it seems
appropriate). Make some reference to your positive impressions of the company.

In the second paragraph, offer some new information or additional reason for the employer to be
interested in you for that job-perhaps a "goodie" that you didn't mention in the interview. (You might even
link this new information to a problem or opportunity the company is experiencing.) Repeat the job title
you are applying for, and show continued interest in it.

In the last paragraph, let the employer know (graciously) that you expect to hear from them again and
"plant" the idea in her mind of a phone call to you. Make it clear you're willing to come in and discuss the
job further, if necessary.

                                          Thank You Letter Example

Martina Bosserio
Manager, Product Development Dept.
Widget Corporation
1520 Widget Drive
Metropolis, NY 10021

Dear Ms. Bosserio,

I enjoyed the opportunity to meet with you and have a brief tour of Widget Corporation. The high level of
creative energy among your staff, as well as their personal pride in the company's products, was obvious
and very gratifying to see.

In addition to the information I shared with you in our meeting, I thought of another project I worked on
that reflects the kind of contribution I could make as a member of Widget's product development team.
The details of that project (the proposal and the final report, both of which I authored) are enclosed for
your review.

As soon as you're through interviewing the other candidates, I'd appreciate hearing from you, and of
course I'd be pleased to meet with you again, if necessary, on fairly short notice. I can be reached at home
in the evening as well as at my office during the day.

Sincerely yours,

Geraldine JobHunter
(987) 555-3210 (h)
(987) 555-2106 (w)

                                         Follow Up Letter Guide

A Follow Up Letter should convey these points:
1) I am still interested in the company's current concerns and opportunities.
2) I have something specific to contribute that would benefit the company.
3) I would like to hear from you soon.

Here is an EXAMPLE of what a Follow-Up letter might look like:

Gwendolyn Robbins, Director
Brilliant Lighting Co.
9876 Edison Ave.
Toledo, Ohio

Dear Ms. Robbins,

I'm writing to let you know that I am still very much interested in the Marketing Assistant position we
discussed in our meeting two weeks ago. Although your company is relatively new in the lighting field, I
think the Design Department has created some remarkable products that could prove extremely popular
and profitable, given the right promotion.

You mentioned an interest in exploring the marketing potential of the Internet as one way to increase
Brilliant's market share, and I wanted to remind you that I do have some experience in designing web
pages for the Internet. In fact, I have been "cruising the web" to see what other companies in your field
are doing about promoting their products on the Web. It turns out that only a few of them have discovered
this medium. This means there's a wide-open opportunity for Brilliant Lighting to get in there first and
establish itself as an industry leader.

I will continue this marketing research, and would be delighted to come in again to discuss how I might
apply this information to Brilliant's long-term product promotion plans. Please call me if you need any
additional data for my application, or if you wish to meet with me again to talk about the position.


Janet H. Watts
(987) 555-3210
Email, Janet@hotmail.com

                              From: http://damngood.com//ready/exmpl/references-list.html

Occasionally when you send your resume you will want to attach a list of References. Do this ONLY
when you have just ONE SHOT at making a good impression and only a REMOTE chance of getting an

Ordinarily, you would NOT include your list of References with your resume, but instead bring it
along to the INTERVIEW and produce it only IF, and when, you are asked for it. (Sending unsolicited
references could make the opposite impression that you want to make, portraying you as so insecure that
you have to throw everything at them in hope of being found acceptable!)

When you DO find it appropriate to make a list of References, DO IT RIGHT! Make sure that you have
ASKED each person on your reference list whether they are willing to put in a good word for you, and
you know roughly what they plan to say.

Make sure that you immediately SEND them a copy of your current resume, showing which job you are
applying for, and include a copy of the job announcement if possible.

If you REALLY want this job, and NEED some great references, attach a "Guideline for a Verbal
Employment Reference." The Guideline COACHES your reference person so they can respond with just
the right answers when a potential employer calls for an employment reference. You'll get MUCH
BETTER references using this Guideline than by trusting your good luck and your reference persons'
judgment. AND your reference people will BLESS you for making their task a lot easier and more

What to include when listing your references
Name (and title if appropriate)
Street Address
City, State and Zip
Work phone
Home Phone (optional)
Relationship to you (if not obvious)
Qualifications of yours this reference can discuss

    Example of a Good References List

             444 Elmira Street
            Enterprise, AL 33633
              (205) 555-6543


         Major John P. Cleveland
             44 Clarendon Way
            Enterprise, AL 36330
      Work: 205-555-8777 (7:30-5:00)
     Home: 205-555-9999 (after 6 pm)
   Familiar with my supervisory experience

          SFC James L. Rogers
            1500 Dreyfus Ave.
             Ozark, AL 36366
     Work: 205-555-5555 (7:30-5:00)
     Home: 205-555-6868 (after 6 pm)
   Familiar with my mechanical expertise

             Mrs. Jane Hiller
             1212 Hillcrest St.
            Memphis, TN 55111
           Home: 555-555-4444
         Family friend for 20 years;
 Can talk about my education and character

            Rev. Felix Milhouse
           First Methodist Church
             12 Evergreen Way
            Enterprise, AL 33633
     Church: 205-555-3333 (8:00-4:00)
            Home: 205-555-2222
   Can discuss my community involvement,
    organization, and leadership ability

      Mr. Ralph Bumstead, Professor
            Troy State University
             Highway 231 North
              Dothan, AL 36303
   Work: 205-555-5555 (8:00-3:00 M-Th)
Familiar with my computer / technology ability

                          Excerpts taken from Our Work and Our Calling
                                                  by John Bernbaum

When we were children, how many times did interested relatives or acquaintances ask us: "What are you going to
be when you grow up?" The same question pursued us through junior high school and high school; in college, the
question persisted, except then we were asking ourselves: "What should I do with my life? What kind of job do I
want?" In mid-life, the question is still there, but with another wrinkle: "Is it time for a job change? Am I going to
do this work for the rest of my life?" And then, much to our surprise, we turn fifty and the very question we started
with comes around again: "What am I going to do when I grow up?"

Much of our life revolves around this question of our work and career. As Christians, we believe that God cares
about us and has given us certain abilities and talents. We also believe that the Bible can give us guidance. What is
often difficult to understand, though, is whether or not God calls us to specific careers.

God is a God of order, and a God who cares deeply about each of us. God also desires that we serve Him, and work
is one of the ways in which that can happen. All of us who love God and are desirous of living in accordance
with His plan can joyfully refer to our work as a "calling." In fact, the word ―vocation‖ is taken from the Latin word
vocatio, which means "calling."

Rather than waiting for divine guidance, which allows us to be passive until "God shows us His perfect plan for our
lives" - which we sure don't want to miss - we should instead be evaluating ourselves by both subjective and
objective criteria. Subjectively, we need to ask ourselves:

            o   "Do I feel called to a particular kind of work?"
            o "Do I have a desire, a passion, for this type of career?"
            o   "Is this job the one I believe God wants me to take?"

These can be tough questions and, often, we have to wrestle with contradictory thoughts waging war in our minds.
But there are also objective criteria to help us, questions such as:

            o   "Do I have abilities and gifts in this area?"
            o   "Am I appropriately qualified to do this work?"
            o   "Do the people who know me best support this vocational direction in my life?"

In addition, there are excellent tests available to help us ascertain our strengths and weaknesses and to determine
which types of jobs we are best equipped to handle. God does "call" us to specific careers, but usually not in a loud
voice. God uses our background, our abilities, our experiences, and our passion to help us find meaningful work;
we must be willing to follow His leading through a reasonable self-assessment and the counsel of others who know
us. _________________________________________________________________________________
Do you long for meaningful work? Are you bored? Are you restless and unsatisfied with your job? Do you feel like
you are just putting in your time at work? The solution is to align your career with your natural motivations and
talents, with God’s help. Here are three steps you might consider to help you get there:

    (1) Prayer, Bible Study and finding a mentor to help guide you.
    (2) Discover what you are gifted to do by seeking answers to the subjective and objective questions proposed
        above (e.g., by taking a career aptitude test)
    (3) Do it! (may involve several preparatory steps such as education, training, apprenticeship/internship, etc.)

Possible free career aptitude test link to help you get started: http://www.careerexplorer.net/aptitude.asp

Thought for the day: When we do all we can for ourselves in the power, guidance, and will of the Holy Spirit,
then God will do for us what we can‘t do for ourselves.

                                            Home Mortgages
                         From: http://www.homebuyinginstitute.com/mortgage-types-23.php

"What type of home loan should I get?" This is one of the most common home buying questions among
home buyers -- especially with first-time home buyers. It's a common question for good reason. Choosing
a type of home loan is one of the most important decisions you'll make during the home buying process,
second only to the home itself.

Believe it or not, choosing the right type of home mortgage loan is fairly straightforward, once you
understand the pros and cons of each type of home loan. It's just a matter of thinking ahead and
considering your financial situation.

This article will help you do the kind of thinking necessary to choose the best type of home loan for your
unique situation.

What is a Home Mortgage Loan?

We like to be thorough here at the Home Buying Institute. So we'd like to start off with a mortgage
definition, just so we're all on the same page. Of all the books and articles I've read on the subject of home
loans, the best mortgage definition I've read was in Home Buying for Dummies, by Eric Tyson and Ray

In their book, Tyson and Brown explain that "a mortgage is nothing more than a loan that you obtain to
close the gap between the cash you have for a down payment and the purchase price of the home..."

You have a certain amount of money. The home costs a certain (larger) amount of money. The home
mortgage loan covers the distance between the two.

It's important to start thinking in these "distance" terms, because a lot can happen to the economy during
the life of your home mortgage loan. How much these factors affect your mortgage depends on the type of
mortgage loan you choose. Aha! Now it all starts to come together.

The Major Types of Home Loans

Let's start with the biggest difference between home loans … fixed-rate vs. adjustable-rate. With a fixed-
rate mortgage loan, your interest rate will never change, regardless of what the economy does. On the
contrary, adjustable-rate mortgages (ARMs) have interest rates that adjust periodically during the life of
the loan.

Terminology note: Adjustable-rate mortgage are also referred to as having a "variable rate." But the more
common usage is adjustable-rate mortgage, or the acronym ARM.

There are many different types of home loans, but to an extent they can all be classified as either fixed-
rate or adjustable-rate. So the important thing is to be sure you understand the definitions, as well as the
pros and cons, of fixed-rate and adjustable-rate home loans. If you start with a good grasp of this concept,
things will be much simpler as we continue learning about the types of home loans.

Fixed-Rate Mortgage Loan: Pros & Cons

As the name suggests, a fixed-rate mortgage is a mortgage where the interest rate stays the same over the
life of the loan. As a result, your monthly mortgage payment does not change.

Certainty is the primary benefit of a fixed-rate mortgage loan. You always know what your interest rate
will be, regardless of what the economy does. The downside is that you'll pay a premium for this
predictability, in the form of a higher interest rate, but they provide security against increases in national
rates, meaning that you might end up paying a much lower rate if you've locked in a lower fixed rate than
the current national rate.

When a mortgage lender grants a fixed-rate loan for a long period of time (like 30 or 40 years), they take
on a certain amount of risk. If the prime interest rate goes up during the life of your loan, you will not
have to pay the difference -- the lender will. This is why they charge a higher interest rate than with an
adjustable-rate mortgage (next topic).

Adjustable-Rate Mortgage (ARM) Loan: Pros & Cons

These days, most adjustable-rate mortgages start off with a fixed rate for an initial period of time, usually
3, 5 or 7 years. During this introductory period, the interstate rate is fixed and will not change. After the
introduction period, however, the loan converts to an adjustable-rate.

Overall, the interest rate on this type of home loan is lower than a traditional fixed-rate mortgage. The
downside is that you can never predict the interest rate it will adjust to after the introductory period. So in
this regard, you can think of the initial period as a reward for the uncertainty of the adjustable period. You
will start off with a lower interest rate than a regular fixed-rate loan, but you have the uncertainty of the
adjustment phase.

During the adjustable phase of the mortgage, your monthly payments will rise and fall with average
interest rates. It would be great if they fell, but bad if they rose. The important thing to remember is that
you'll have no way to predict the average interest rates in advance, so the adjustable nature of the loan is
something of a gamble. Variable rates can sometimes grow to several times the rate you were originally
paying in a matter of months

Balloon Loans

A balloon loan (also referred to as a "reset mortgage") starts with a fixed interest rate for a certain number
of years. But unlike traditional fixed-rate mortgages, the interest rates on balloon loans are nearly as low
as those found on adjustable rate mortgages (ARMs).

The problem with balloon loans is the term. The initial fixed-rate period of a balloon is usually 7 to 10
years. After that, you have to pay off the loan's remaining balance in full. Obviously, that's a large sum of
money to pay at one time! Typically, people refinance their balloon loans prior to this stage, but there's no
guarantee what interest rate you'll get when refinancing.

                          Cancellation of Private Mortgage Insurance
                                     from daveramsey.com on 03 Oct 2008

If you put less than 20% down on a home mortgage, lenders often require you to have Private Mortgage
Insurance (PMI). PMI protects the lender if you default on the loan. The Homeowners Protection Act
of 1998—effective since 1999—establishes rules for automatic termination and borrower cancellation of
PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29,
1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not
apply to government-insured FHA or VA loans or to loans with lender-paid PMI.

For home mortgages signed on or after July 29, 1999, your PMI must—with certain exceptions—be
terminated automatically when you reach 22% equity in your home based on the original property value,
if your mortgage payments are current. Your PMI also can be canceled, when you request—with certain
exceptions—when you reach 20% equity in your home based on the original property value, if your
mortgage payments are current.

Exceptions to the Rule - One exception is if your loan is "high-risk." Another is if you have not been
current on your payments within the year prior to the time for termination or cancellation. A third is if you
have other liens on your property. For these loans, your PMI may continue. Ask your lender or mortgage
servicer (a company that collects your payments) for more information about these requirements.
If you signed your mortgage before July 29, 1999, you can ask to have the PMI canceled once you exceed
20% equity in your home. But federal law does not require your lender or mortgage servicer to cancel the

On a $100,000 loan with 10% down ($10,000), PMI might cost you $40 a month. If you can cancel the
PMI, you can save $480 a year and many thousands of dollars over the loan. Check your annual
escrow account statement or call your lender to find out exactly how much PMI is costing you each

Additional Provisions in the Law
   New borrowers covered by the law must be told - at closing and once a year – about PMI
       termination and cancellation.
   Mortgage servicers must provide a telephone number for all their mortgage borrowers to call for
       information about termination and cancellation of PMI.
   Even though the law's termination and cancellation rights don't cover loans that were signed
       before July 29, 1999, or loans with lender-paid PMI signed on any date, lenders or mortgage
       servicers must tell borrowers about the termination or cancellation rights they may otherwise have
       under those loans (such as rights established by the contract or state law).

Next Steps- Some states may have laws that apply to early termination or cancellation of PMI – even if
you signed your mortgage before July 29, 1999. Call your state consumer protection agency for more
information about your state's rules. Fannie Mae and Freddie Mac, which buy home mortgages from
lenders, also may have guidelines affecting termination or cancellation of PMI on home mortgages signed
before July 29, 1999. Check with your lender or mortgage servicer, or call Fannie Mae or Freddie Mac,
for more information.

Contact your lender or mortgage servicer to learn whether you're paying PMI. If you are, ask how and
when it can be terminated or canceled.

                             So You Want to Start a Small Business
                                     from daveramsey.com on 03 Aug 2009

Doesn't it sound like a great idea to start your own business, maybe from home, so you can be in control
of your destiny, have flexible hours and not have to worry about a control-freak boss?
Unfortunately, it's not as simple as that. Small-business owners work unbelievably hard, and even hard
work doesn't guarantee success. According to the Small Business Association, only two-thirds of small
businesses survive two years.There's no magic formula to making a business work, but here are a few tips
to get you thinking in the right direction:

Love what you do!

What would you do if money and time were not factors? What do you have a passion for? According to
Success magazine, the entrepreneur is the only one who can go from sheer terror to sheer exhilaration and
back every 24 hours. It's a roller coaster ride, so you better love what you're doing in order to
survive it. That doesn't mean you won't have bad days if you're doing work you love. Everyone has days
when they want to throw up their hands even though they love what they do. But if you don't love it and
are just doing it for money, it won't last long.

Save up. Don't borrow.

Start your business debt free with an emergency fund in place. It's easier if you can start part-time and get
the kinks worked out while you still have other income. If you're going to quit your job and walk out, you
definitely need substantial savings. You have to think about how long it will take from starting your
business to the time money will start rolling in and plan accordingly. Never use credit cards for a
business loan or to float you through hard times. It's a good way to cause your business to fail. Saving up
for purchases is key. Pay with cash. Make sure your business can pay its own way. Don't go out and
purchase a bunch of new equipment and supplies in hopes that the business will succeed. Start off small.

Do your homework.

If you want to be skinny, talk to skinny people and see what they do. If you want to open an eBay store,
talk to people who have successful eBay stores. Talk to people who have started similar businesses, read
about the industry, and do some research.

Next Step

If you're a small-business owner or you want to start your own business, EntreLeadership 1-Day may be
just the thing for you. Get details of this event at:


At EntreLeadership, you will learn the keys to successful marketing, administration, accounting,
management, team building—and even unique life lessons that have directly impacted how Dave operates
each day.

      Home Equity Lines of Credit and Home Equity Loans (Second Mortgages)

What is a home equity line of credit?
Also known as a HELOC, a home equity line of credit is a type of revolving credit for which your home
is pledged as collateral. . Obviously, this kind of borrowing may jeopardize your home and you, if you
default on a loan or even if you are late with your monthly payments. The interest rate and payments
are variable. The term is defined by a draw period and a repayment period. The payment each month is
based upon the outstanding balance owed. As payments are applied to principal, your available credit
increases accordingly.

You can estimate your home's equity by adding the balance of all the debts secured by your home, then
subtracting the total from your home's value.

What are the advertised advantages of a home equity line of credit?
The two major advantages touted of borrowing with a home equity line of credit are lower interest rates
and potential tax savings:

   o The interest rate you pay on the average home equity line of credit is generally lower than the
     interest rate you will pay on the average credit card or other type of non-secured debt.

   o For home equity lines of credit, you can generally deduct the interest you pay. The interest you
     pay on credit cards and other types of personal loans is generally not tax-deductible. If your line
     exceeds fair market value of the property, the interest may not be tax deductible. Consult your tax
     advisor about the deductibility of interest.

What are the disadvantages of a home equity line of credit?

A loan with a balloon payment, that is a large payment at the end of the loan term, may result in your
borrowing more money to pay off the debt. It may also put your home at risk, if in the course of the
original loan you are deemed ineligible for refinancing. In the event that you sell your home, the
conditions of most loans will require you to pay off all debts on your credit line at that time. While home
equity loans provide you with ready cash quite easily, you tend to borrow more freely as well.

A Home Equity Line of Credit (HELOC) works in the same way as a credit card, as in it affords the
borrower a revolving credit line, whereby funds are drawn out whenever the borrower wishes to do so, as
opposed to one lump sum. There can be financial penalties as with a credit card, and your rate will change
as the prime rate changes.

What is a home equity loan?
A home equity loan is a form of credit for which your home is pledged as collateral. It is often known as a
2nd mortgage. Obviously, this kind of borrowing may jeopardize your home and you, if you default on a
loan or even if you are late with your monthly payments. Generally, home equity loans offer a fixed
interest rate and a fixed monthly payment. A standard home equity loan (also called a second mortgage) is
paid off over an extended period of time.

You can estimate your home equity by adding the balance of all the debts secured by your home, then
subtracting the total from your home's value.

What are the advertised advantages of a home equity loan?

The two major advantages touted of borrowing with a home equity loan are lower interest rates and
potential tax savings:
    o The interest rate you will pay on the average home equity loan is generally lower than the interest
        rate you will pay on the average credit card or any other type of non-secured debt.

   o For home equity loans, you can generally deduct the interest you pay. The interest you pay on
     credit cards and other types of personal loans is generally not tax-deductible. Consult your tax
     advisor about the deductibility of interest.

A second mortgage is an alternative to home equity line of credit and home equity loans. Second
mortgage plans place an extra future burden on your home or property, in terms of an added mortgage and
added years of payments. The money lent is usually given as a lump sum, not as advances through
continuous charges to a card or checking account. Also, a second mortgage generally has a fixed rate and
fixed monthly payments.

Why you should not borrow:
You should not do a home equity line of credit because they have terrible terms: variable rates that vary
based on the banks whim, balloon mortgages that come due in 3 or 5 years. They are just bad loans. If
you take out a fixed-rate, fully-ammotorized second mortgage home equity loan, the interest rate can be
high, although less than the average credit card. Plus, you are putting yourself and your home at risk,
especially if it is paid off, or has a good deal of equity built up.

Myth: You should keep your home mortgage and /or take out a home equity line of credit or 2nd
mortgage for tax advantages.

Truth: The math just doesn‘t work.

Say you want to borrow $100,000 against your home using a home equity line of credit or a home equity
loan. At a fixed 5% interest, the annual interest paid on the loan is $5000, plus some principal. The
mortgage interest is tax-deductible, so you would not have to pay taxes on this $5000. That is why many
people tell you to keep the mortgage or borrow using a home equity line of credit or a home equity loan
(2nd mortgage). But what does that really save you?

If you are in the 25% tax bracket, your annual tax paid on the $5000 would be $1250.00. So, if you do the
above for tax advantages, all you are really doing is paying $5000 to the bank instead of paying $1250 to
the IRS. Where‘s the advantage in that? Plus, if you are still paying on your 1st mortgage, there‘s more
interest going to the bank where your tax bill is reduced by only 25% of whatever your annual interest
payment is. There is no advantage in this - the math just doesn‘t work!

You are always better off not borrowing and thus avoiding the risk you place on your home and yourself
by pledging your home as collateral. There is no tax advantage to borrowing if it is going to cost you
more in interest than what you save in taxes.

My advise is: DO NOT BORROW MONEY FOR ANYTHING if you can possibly avoid it. Have ZERO
debt and live below your income so you can save and pay cash for whatever you need or desire. Be
patient, delay pleasure and save for that project, needed expense, new ―toy‖ or dream vacation. Plan ahead
by maintaining a monthly cash flow plan and try to anticipate what could go wrong or what future
expense you might have that you would need to save for. Build up your emergency fund so that you have
3 – 6 months of expenses in reserve. That way, you won‘t be pressed for scraping up needed cash or
tempted to borrow money should some expensive, unexpected ―Murphy‖ event occur like your furnace
going out and needing replacement, or the roof leaking and needing replacement, or the car breaking
down and the transmission needing major repair or replacement, etc.

                     Dave Ramsey Answers Questions About Mortgages
                                          (from: daveramsey.com)
QUESTION: Mark and his fiancé are getting ready to purchase a home and have a few questions. What
percentage of their take-home pay should they allocate for a house? Should they take out two mortgages
to avoid PMI? Should they do an interest-only mortgage?

ANSWER: You should not take out more than one-fourth of your take-home pay on a 15-year fixed

You should not do two mortgages. Avoiding the PMI insurance is a good idea when you can, but taking
out a second mortgage with a higher rate, an adjustable rate, and/or a balloon on it messes up your
financial picture.

You should not do an interest-only mortgage. It means you pay only the interest and you‘ll be paying for
the rest of your life.

You should not buy a house with someone you‘re not already married to. I would suggest you only buy a
house after you‘ve been married for one year. Getting a house with someone you‘re not already married
to creates a financial, relational, and legal mess.

QUESTION: A listener asks if he should get a home equity loan to cover the 20% down payment so that
he doesn‘t have to pay PMI (Private Mortgage Insurance).

ANSWER: Let me first define PMI. When you take out a conventional - a Fannie Mae loan - you have
to put at least 20% down or else they force you to purchase Private Mortgage Insurance, also known as
foreclosure insurance. If you put 20% or more down they will not charge you the PMI, which is $65-$70
each month per $100,000 borrowed.

In this situation, you‘re better off to pay the PMI, but if you can‘t make a good down payment, you
probably shouldn‘t be buying a house right now.

You should not do a home equity loan to cover the down payment because home equity loans have
terrible terms: variable rates that vary based on the banks whim, balloon mortgages that come due in 3 or
5 years. They are just bad loans. If you take out a fixed-rate, fully-ammotorized second mortgage home
equity, the interest is so high that you‘ll wish you had just paid the PMI.

QUESTION: Marleese and her husband have 2 mortgages. The first is on a 30-year, 5.65% fixed rate.
The second mortgage is 7.1% and has a balance of $23,000. They bring home $60,000. Should they
refinance and combine both mortgages?

ANSWER: You should not refinance and combine the first mortgage with other home equity lines. As
long as your second mortgage is less than half of your take-home pay, you should be able to pay it off.
Just make that second mortgage a focused goal in your debt snowball.

Then, to pay off your house in 15 years instead of 30 years, just calculate how much more you‘d have to
pay each month. Send in the extra payments, making sure to write ―principle only‖ on the check for the
additional amount. You don‘t have to refinance to pay off your house earlier.

                                  Looking for the Best Mortgage
                   (From: http://www.federalreserve.gov/PUBS/MORTGAGE/MortB_1.HTM#content)

Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage--
whether it‘s a home purchase, a refinancing, or a home equity loan--is a product, just like a car, so the
price and terms may be negotiable. You‘ll want to compare all the costs involved in obtaining a mortgage.
Shopping, comparing, and negotiating may save you thousands of dollars.

Obtain Information from Several Lenders

Home loans are available from several types of lenders--thrift institutions, commercial banks, mortgage
companies, and credit unions. Different lenders may quote you different prices, so you should contact
several lenders to make sure you‘re getting the best price. You can also get a home loan through a
mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they
find a lender for you. A broker‘s access to several lenders can mean a wider selection of loan products
and terms from which you can choose. Brokers will generally contact several lenders regarding your
application, but they are not obligated to find the best deal for you unless they have contracted with you
to act as your agent. Consequently, you should consider contacting more than one broker, just as you
should with banks or thrift institutions.

Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions
operate as both lenders and brokers. And most brokers‘ advertisements do not use the word "broker."
Therefore, be sure to ask whether a broker is involved. This information is important because brokers are
usually paid a fee for their services that may be separate from and in addition to the lender‘s origination
or other fees. A broker‘s compensation may be in the form of "points" paid at closing or as an add-on to
your interest rate, or both. You should ask each broker you work with how he or she will be compensated
so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the

Obtain All Important Cost InformationBe sure to get information about mortgages from several
lenders or brokers. Know how much of a down payment you can afford, and find out all the costs
involved in the loan. Knowing just the amount of the monthly payment or the interest rate is not enough.
Ask for information about the same loan amount, loan term, and type of loan so that you can compare the
information. The following information is important to get from each lender and broker:


        Ask each lender and broker for a list of its current mortgage interest rates and whether the rates
         being quoted are the lowest for that day or week.
        Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-
         rate loans go up, generally so does the monthly payment.
        If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary,
         including whether your loan payment will be reduced when rates go down.
        Ask about the loan‘s annual percentage rate (APR). The APR takes into account not only the
         interest rate but also points, broker fees, and certain other credit charges that you may be required
         to pay, expressed as a yearly rate.


Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the
more points you pay, the lower the rate.
      Check your local newspaper for information about rates and points currently being offered.
      Ask for points to be quoted to you as a dollar amount--rather than just as the number of points--so
       that you will actually know how much you will have to pay.


A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and
transaction, settlement, and closing costs. Every lender or broker should be able to give you an estimate
of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as
application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money
needed to pay these fees, but doing so will increase your loan amount and total costs. "No cost" loans are
sometimes available, but they usually involve higher rates.

      Ask what each fee includes. Several items may be lumped into one fee.
      Ask for an explanation of any fee you do not understand. Some common fees associated with a
       home loan closing are listed on the Mortgage Shopping Worksheet in this brochure.

Down Payments and Private Mortgage Insurance

Some lenders require 20 percent of the home‘s purchase price as a down payment. However, many
lenders now offer loans that require less than 20 percent down--sometimes as little as 5 percent on
conventional loans. If a 20 percent down payment is not made, lenders usually require the home buyer to
purchase private mortgage insurance (PMI) to protect the lender in case the home buyer fails to pay.
When government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans
Administration), or Rural Development Services are available, the down payment requirements may be
substantially smaller.

      Ask about the lender‘s requirements for a down payment, including what you need to do to verify
       that funds for your down payment are available.
      Ask your lender about special programs it may offer.

If PMI is required for your loan

      Ask what the total cost of the insurance will be.
      Ask how much your monthly payment will be when the PMI premium is included.

Obtain the Best Deal That You Can
Once you know what each lender has to offer, negotiate for the best deal that you can. On any given day,
lenders and brokers may offer different prices for the same loan terms to different consumers, even if
those consumers have the same loan qualifications. The most likely reason for this difference in price is
that loan officers and brokers are often allowed to keep some or all of this difference as extra
compensation. Generally, the difference between the lowest available price for a loan product and any
higher price that the borrower agrees to pay is an overage. When overages occur, they are built into the
prices quoted to consumers. They can occur in both fixed-rate and variable-rate loans and can be in the
form of points, fees, or the interest rate. Whether quoted to you by a loan officer or a broker, the price of
any loan may contain overages.

Have the lender or broker write down all the costs associated with the loan. Then ask if the lender or
broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. You‘ll want to

make sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the
rate while raising points. There‘s no harm in asking lenders or brokers if they can give better terms than
the original ones they quoted or than those you have found elsewhere.

Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from
the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in
lasts, and the number of points to be paid. A fee may be charged for locking in the loan rate. This fee may
be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed;
if rates fall, however, you could end up with a less favorable rate. If that happens, try to negotiate a
compromise with the lender or broker.

Remember: Shop, Compare, Negotiate

When buying a home, remember to shop around, to compare costs and terms, and to negotiate for the best
deal. Your local newspaper and the Internet are good places to start shopping for a loan. You can usually
find information both on interest rates and on points for several lenders. Since rates and points can change
daily, you‘ll want to check your newspaper often when shopping for a home loan. But the newspaper
does not list the fees, so be sure to ask the lenders about them.

The Mortgage Shopping Worksheet that follows may also help you. Take it with you when you speak to
each lender or broker and write down the information you obtain. Don‘t be afraid to make lenders and
brokers compete with each other for your business by letting them know that you are shopping for the
best deal.

Fair Lending is Required by Law

The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any
aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age,
whether all or part of the applicant‘s income comes from a public assistance program, or whether the
applicant has in good faith exercised a right under the Consumer Credit Protection Act.

The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race,
color, religion, sex, handicap, familial status, or national origin.

Under these laws, a consumer cannot be refused a loan based on these characteristics nor be charged
more for a loan or offered less favorable terms based on such characteristics.

Credit Problems? Still Shop, Compare and Negotiate

Don‘t assume that minor credit problems or difficulties stemming from unique circumstances, such as
illness or temporary loss of income, will limit your loan choices to only high-cost lenders. If your credit
report contains negative information that is accurate, but there are good reasons for trusting you to repay
a loan, be sure to explain your situation to the lender or broker. If your credit problems cannot be
explained, you will probably have to pay more than borrowers who have good credit histories. But don‘t
assume that the only way to get credit is to pay a high price. Ask how your past credit history affects the
price of your loan and what you would need to do to get a better price. Take the time to shop around and
negotiate the best deal that you can.

Whether you have credit problems or not, it‘s a good idea to review your credit report for accuracy and
completeness before you apply for a loan.

                             Mortgage Shopping Worksheet
                                                      Lender 1                 Lender 2
Name of Lender:
Name of Contact:
Date of Contact:
Mortgage Amount:
                                              mortgage 1   mortgage 2   mortgage 1   mortgage 2
Basic Information on the Loans
Type of Mortgage: fixed-rate, adjustable-
rate, conventional, FHA, other? If
adjustable, see below.
Minimum down payment required
Loan term (length of loan)
Contract interest rate
Annual percentage rate (APR)
Points (may be called loan discount points)
Monthly private mortgage insurance (PMI)
How long must you keep PMI?
Estimated monthly escrow for taxes and
hazard insurance
Estimated monthly payment (principal,
interest, taxes, insurance, PMI)
Different institutions may have different
names for some fees and may charge
different fees. We have listed some typical
fees you may see on loan documents.
Application fee or Loan processing fee
Origination fee or Underwriting fee
Lender fee or Funding fee
Appraisal fee
Attorney fees
Document preparation and recording fees
Broker fees (may be quoted as points,
origination fees, or interest rate add-on)
Credit report fee
Other fees
Other Costs at Closing/Settlement
Title search/Title insurance
  For lender
  For you

Estimated prepaid amounts for interest,
taxes, hazard insurance, payments to escrow

State and local taxes, stamp taxes, transfer

Flood determination

Prepaid private mortgage insurance (PMI)

Surveys and home inspections

Total Fees and Other Closing/Settlement
Cost Estimates

                                                       Lender 1                 Lender 2
Name of Lender:
                                               mortgage 1   mortgage 2   mortgage 1   mortgage 2
Other Questions and Considerations
about the Loan
Are any of the fees or costs waivable?
Prepayment penalties
Is there a prepayment penalty?
If so, how much is it?
How long does the penalty period last? (for
example, 3 years? 5 years?)
Are extra principal payments allowed?
Is the lock-in agreement in writing?
Is there a fee to lock in?
When does the lock-in occur--at application,
approval, or another time?
How long will the lock-in last?
If the rate drops before closing, can you
lock in at a lower rate?
If the loan is an adjustable rate
What is the initial rate?
What is the maximum the rate could be next
What are the rate and payment caps each
year and over the life of the loan?
What is the frequency of rate change and of
any changes to the monthly payment?
What is the index that the lender will use?
What margin will the lender add to the
Credit life insurance
Does the monthly amount quoted to you
include a charge for credit life insurance?
If so, does the lender require credit life
insurance as a condition of the loan?
How much does the credit life insurance
How much lower would your monthly
payment be without the credit life
If the lender does not require credit life
insurance, and you still want to buy it, what
rates can you get from other insurance

           Week 7 Reading Assignment
Some New Testament Guidelines for Christian Giving When You are in Debt

                      The Great Misunderstanding

     Some New Testament Guidelines for Christian Giving When You are in Debt
       Some exerpts taken from: http://www.providentplan.com/1112/new-covenant-giving-guidelines-for-christians

1. Provide for Your Family’s Needs First

Giving so much that you neglect your family‘s needs does not honor God. Your first priority must be to
care for the needs of your family. God has made it clear that this is His first priority as well:

       But if anyone doesn‘t provide for his own, and especially his own household, he has
       denied the faith, and is worse than an unbeliever. - 1 Timothy 5:8

Paul makes it clear that neglecting your family‘s needs is a serious offense to God for a Christian – on the
order of denying the faith and being worse than an unbeliever. This is a serious matter! So meeting your
family‘s needs has to be your first priority. You should not consider giving until you have met this
obligation. But, don‘t forget that there are other ways to give besides money. I‘ll talk more about this
later. God may still lead you to give if it means denying the needs of your family, but these verses make it
clear that you must be certain it truly is God‘s will for you to give if it will prevent you from meeting your
family‘s needs.

However, the difficulty for Christians – especially those in wealthy countries, like America – is
differentiating our wants from our needs. The line between a want and a need is often blurred in America.
Is cable TV a family need? Is eating out a family need? Is an expensive car a family need? Are extra
phones or internet access a family need? Be careful that you do not mistake a want as a legitimate need.

This idea should also include reasonably providing for future needs, which would include savings and
insurance. Again, remember we‘re talking about needs and not wants. Making sure you‘ll be able to eat a
decent, healthy meal when you can‘t work any more is saving for a need. Saving so you can eat at five-
star restaurants every night during retirement is not a need – it‘s a want. Once more, be sure you don‘t
mistake wants as needs.

2. Pay What You Owe

After meeting your family‘s needs, your next duty is to pay whatever you owe. Your giving should never
put you in a position where you will fail to pay what you owe to others (debts, taxes, etc.). Breaking a
vow or promise to pay so that you can give will not honor God.
         Give therefore to everyone what you owe: taxes to whom taxes are due; customs to
       whom customs; respect to whom respect; honor to whom honor. 8 Owe no one anything,
       except to love one another; for he who loves his neighbor has fulfilled the law. - Romans

       Note: ―Honor‖ in verse 7 can also be translated as ―money‖, as in a debt you owe.

It‘s clear that you must first fulfill your obligations to pay anything you have promised to pay. I don‘t take
this verse to mean that you shouldn‘t give at all if you are in debt. Most debt agreements require that you
make a certain minimum payment – and that is an obligation you must keep. If you need to take on a 2nd
job or a part-time job in order to do so, then do it. If you have lost your job due to no fault of your own,
take on any job you can find to survive and pay something on the debts you owe. This is a temporary
situation that you have to live with until you no longer have any debt obligations.

If you are deeply in debt but able to meet your family‘s needs and make your minimum debt payments,
you will need to seek guidance from the Holy Spirit to determine how much of your extra should be given
away and how much of that extra should go toward repaying your debt in full. Debt is a yoke around your
neck because of the burdens it creates. It is clearly something God warns us not to do, and He tells us that
if we are in debt, to repay it as fast as we can with ―gazelle‖ intensity. (Proverbs 6:1-5) We are not
honoring God by giving if we cannot pay the debts we owe and make payments in the amounts agreed to
because of our giving, but we do honor Him when we follow the advice of Proverbs 6:1-5 and pay off our
debts as quickly as we are able.

God warns against the dangers of debt and explains why it is not prudent. Here are the main verses where
the Bible discusses the nature of debt.

Debt Is Slavery.

If you owe someone money, you must continue paying them back until you owe no more or you risk
going to court. In Jesus‘ day, if you couldn‘t pay your debts, you went to jail until the debts were paid
(how do you pay your debts from jail?) and if some relative didn‘t bring you food, you‘d starve to death,
and if some benovelent relative didn‘t pay your debts for you, you remained in jail until you died. Both
you and your family paid a very dear price! And, it‘s not all that different today. The obligation you‘ve
made to repay puts you under the same bonds as slavery. You‘re not free to choose whether you‘ll pay
them back, which also means you‘re not free to choose to work for pay to do anything else. You are
required to keep sending those payments until the debt is paid in full. You have no freedom.

This is God‘s strongest warning against debt:

       The rich rules over the poor, and the borrower is the slave of the lender. - Proverbs 22:7

The borrower is slave to the lender. God doesn‘t say that those who borrow are sinners. But He does warn
that when you borrow you put yourself under the yoke of slavery to your lender. God doesn‘t want us to
serve anyone or anything but Him. In fact, Jesus warned us that we can‘t serve Money and God. We have
to choose one. When you put yourself in debt, you are making yourself a slave to your lender – which
requires you to do whatever you can to get the Money you need to repay him. You are making a choice to
serve Money and not to serve God, it‘s as simple as that.

If you stopped paying your mortgage or auto loan or any other loan, what would happen? You‘d have
those things taken away from you or you‘d eventually be forced to file for bankruptcy. Until you‘ve paid
those loans off, you do not own the things you bought with borrowed money. You‘re not a homeowner
if you have a mortgage. You’re a bank’s slave. You must continue working for them and not yourself to
repay them, or they will take your home and ruin your credit.

What Will Happen If You Can’t Repay?

Knowing that the things you‘ve put up as security for your debts can be taken if you don‘t repay should
alert you that it is foolish to borrow money. If you lose your job and can‘t pay your mortgage, what will
happen? Your home will be taken from you. The very place you sleep will be pulled right out from under
       Be not one of those who give pledges, who put up security for debts. 27 If you have nothing
       with which to pay, why should your bed be taken from under you? - Proverbs 22:26-27

Is it worth borrowing money if you‘ll risk losing the very things you‘re working for? When the bank takes
your home, you risk losing most or all of the equity you managed to build up. Sometimes, your ability to
repay a loan is not completely in your control. A job loss or illness can easily throw you into a bad
situation which causes you to lose everything. That‘s why God asks you if going into debt is worth the
risk. You‘re better off to save and pay cash.

Debt Is Foolish

The problem with debt is not that it‘s a sin. The problem is that it can be just plain dumb when it is
consciously and purposely done. As I mentioned before, you can be forced into a bad situation because of
things completely out of your control. Being in debt only makes that bad situation worse. God doesn‘t
want debt to put that extra strain on you when you‘re going through a tough time. That‘s why He

       One who lacks sense gives a pledge and puts up security in the presence of his neighbor. -
       Proverbs 17:18

Putting yourself in debt shows a lack of wisdom. Forget those who try to tell you that the mathematically
better choice is to get a loan and pay it off over time because you can earn more in the stock market.
Forget those who tell you that having a mortgage or a 2nd mortgage or a home equity line of credit saves
you money on your taxes. The real math just doesn‘t support such assertions. God tells us plainly and
simply that debt is foolish. It‘s not a good choice. Just looking at the difference in returns between
investing or paying off debt or having a mortgage to avoid paying some taxes doesn‘t account for God‘s
wisdom, the problems that occur when you can‘t repay, or the fact that debt is slavery. Plus, the returns
just aren‘t there! In the case of debt, you don‘t need mathematical calculations to show that it‘s a bad
decision. God has plainly told us that it‘s not a good thing, and He‘d rather we stayed away from it.

Owe No One Anything Except Love

Finally, Paul gave us good advice in Romans:

       Owe no one anything, except to love each other, for the one who loves another has fulfilled
       the law. - Romans 13:8

The only debt we should owe anyone is the debt to love. In its context, this verse means that we should
pay whatever we owe. This idea is also reflected in Psalm 37:21, where it says that the wicked borrow and
do not pay back but the righteous are generous and give. We need to focus our time and energy on
showing God‘s love to the world rather than spending our valuable time repaying the debts we‘ve taken
on foolishly. Our goal should be to get out of debt with ―gazelle intensity‖ and avoid it as much as
possible so we can devote ourselves to loving God and others, and to serving God and others more and
more. A life free of debt is a life free to love and serve others at all times. You are no longer bound by the
chains of debt. You are free to use your time, talents, money and posessions showing love and serving
God and others rather than working to repay your debts.

None of this means that some debt may not have its proper place in our finances. But foolish debt – to buy
things we don‘t need or we can‘t really afford – is not going to glorify God. You should only be going
into debt to buy a home if you can‘t obtain one any other way, and only when you can put a substantial
amount down (never less than 10%, and 20% or more is preferable), and when you are reasonably sure
you can repay the loan and then pay it off as quickly as you can (in 15 years or less). There is nothing
wrong with renting for a while until you have saved enough for a large down payment and feel secure in
your job. A home is a good investment under these circumstances, and will usually provide a substantial
gain in the long-term. But, you should never go into debt for anything else if you can possibly avoid it.

Debt is a choice. Choosing debt is a bad choice, and it‘s a poor master. Free yourself from being anyone‘s
slave except Christ‘s. For He has bought us with His blood, and by choosing Him we are choosing to have
no other master but God.

Being free of debt enables you to give even more, but the decision to stop giving in order to get out of
debt is something you must personally discuss with God through prayer. Scripture is clear that you must
first take care of your family (food, shelter and utilities, transportation, and clothing) and at least meet the
debt payments you have agreed to make. It is also clear that we should give back to God from our
increase. But, if because of debt we are simply surviving on what we earn and cannot meet all our debt
payments or can only make the minimum payments with nothing left over, then we have no increase from
which to give. We are bond slaves to Money and to our Creditors. The money we earn is no long ours to
give – we have no discretionary income, no increase. It all belongs to our creditors, and we cannot
morally spend or give what belongs to someone else!

We need to have a plan for getting out of debt. We need to take any extra job or part-time job available to
raise our income so we can begin paying more to our creditors until the debt is paid, If we have lost our
primary job, we need to take any job we can find, even 2 or more part-time jobs until something better
comes along. In this situation, don‘t even think that any job is beneath you. Take whatever you can get –
this is a temporary situation and a desperate situation as well. The more income we have, the sooner our
debt is paid and our bondage is ended. No job or not enough income means we could eventually lose
everything we have that we have spent borrowed money on, and more.

While it may be tough going during the debt-dumping days, we should give something back to God, even
if it is only a few dollars or just pocket change. It‘s not the amount or what it does to the organization to
which you give. It‘s about what it does to you, deep down inside. When there‘s no money left over to give
after taking care of our family and paying our creditors, the Bible tells us there are other ways to give
besides money: we can give of our time, our talents and our possessions. (Matthew 25:34-40) Our giving
should always be Spirit-lead giving. No matter the amount or the form of your giving, or the recipient,
just give something. Plus, continuing to give something during the financial dry spells will solidify you in
a spirit of generosity that will carry over into the financial good times.

3. After You Have Taken Care of Your Family and Paid What You Owe, Give Generously to
Anyone in Need.

After you‘ve followed those first two guidelines above, the only instructions we have as Christians are to
give generously to anyone in need (even our enemies):

         But love your enemies, and do good, and lend, expecting nothing back; and your reward
       will be great, and you will be children of the Most High; for he is kind toward the
       unthankful and evil. - Luke 6:32-35
We should give willingly, cheerfully, generously according to our ability, and out of love. (2 Corinthians
9:6-10; 2 Corinthians 8:3)

You‘re not going to find a specific percentage or amount in the New Covenant that dictates how much a
Christian should give beyond what was stated in the previous paragraph. Our example for giving is Jesus,
who gave everything generously and sacrificially – even while we were still sinners rejecting God. The
only standards we have are to take care of our family‘s needs, pay what we owe, and then give generously
to the needy with the right motives in our hearts. Here‘s what the Bible says:

       He answered them, ―He who has two coats, let him give to him who has none. He who has
       food, let him do likewise.‖ - Luke 3:11

       Let each man give according as he has determined in his heart; not grudgingly, or under
       compulsion; for God loves a cheerful giver. – (2 Corinthians 9:7)

       But whoever has the world‘s goods, and sees his brother in need, and closes his heart of
       compassion against him, how does the love of God remain in him?
       (1 John 3:17)

       If I dole out all my goods to feed the poor, and if I give my body to be burned, but don‘t
       have love, it profits me nothing. (1 Corinthians 13:3)

While those verses don‘t tell us how much we should give, they do make it clear that we, as Christians,
are to be extremely generous for the right reasons (giving motivated by love for God and others)
according to our ability. It‘s also important to remember that just giving money isn‘t enough to please
God – right relationships are much more important:
          If therefore you are offering your gift at the altar, and there remember that your brother
       has anything against you, 24 leave your gift there before the altar, and go your way. First be
       reconciled to your brother, and then come and offer your gift. - Matthew 5:23-24


So what are we to do if we are heavily in debt? How do we know how much to put in our ―Giving‖
category when we make our budget? The answer is to commit yourself and your money to God, then
follow His Spirit‘s guidance as to how much, to whom, and how often you should give depending on your
financial situation. God expects us to take care of our family, pay our debts, and give according to our
ability (2 Corinthians 8:3).

God‘s desire isn‘t for people who just follow a set of rules. God desires a personal relationship with each
one of us – and good relationships require lots of time and communication. (Matthew 5:23-24)

There are three things to do with money: Spend, Save and Give.

1. You have to spend in order to have the things you need to survive. These are necessities that you pay
for before anything else. If you have debt, you have an obligation to pay your creditors the amount agreed
upon before you do any other (discretionary) spending. God tells us in Scripture that these are things we
must take care of.
2. Saving (and insurance) is for the purpose of securing your family‘s future. Discretionary spending
beyond that should only occur when there is money left over (an increase) after all the previously
mentioned necessary spending and debt obligations have been paid.

3. By staying out of debt, creating an emergency fund for unexpected expenses, and saving for your
future, you will always have money left over (an increase) to give back to to God, to your church and
community, to a friend, relative or neighbor in need, to missions, and to valid charitable organizations.
Being free of debt enables you to give even more toward serving others, serving God and advancing His
kingdom on earth because you are no longer working under bondage to others. You are working for
yourself, and you have more free time to devote to others and to God.

Even during the debt dumping days, give something, even if it‘s only a dollar or two, or just pocket
change. But, if there‘s no money left over to give after taking care of your family and paying your debts,
you can give of your time, your talents and your possessions. Perhaps you have something that you no
longer use or need. Someone with greater needs than yours might be able to use that item or items. Just
give something, and even if it‘s not much, don‘t worry. It‘s not about the amount you give, it‘s about
what‘s in your heart, what‘s deep down inside of you. There‘s something special about giving, about the
way it refreshes your heart and helps you to see what is most important: your relationship with God and
others! No matter the amount or the form your giving takes, just give!

                                      The Great Misunderstanding
      From: http://www.biblemoneymatters.com/2008/08/dave-ramseys-financial-peace-university-week-13-the-great-

―Be Generous. Give to those you love. Give to those who love you. Give to the fortunate. Give to the
unfortunate – yes, give especially to those you don’t want to give. You will receive abundance for your
giving. The more you give, the more you will have.‖ – W. Clement Stone

Nearly every day callers to ―The Dave Ramsey Show‖ ask Dave, ―If I‘m still in debt, should I stop giving
to my church or charitable organizations?‖

For Christians and practicing Jews, this is a slightly more complicated situation because the Bible and the
Torah instruct believers to give at least 10% of their income to the church. There are many people who
simply want to be able to give whether they attend church or not, but they don‘t feel they can afford it
while they‘re working the debt snowball.

In this situation, Dave offers some very sound and simple advice: give.

While it may be tough during the rice-and-beans, debt-dumping days of Baby Step 2, Dave says that even
if it’s not much, don’t worry. It‘s not about the amount or what it does for the organization to which you
give. It‘s about what it does to you, deep down inside.

You‘ll be happier, healthier, and you‘ll get so much more out of life when you intentionally and regularly
give. Plus, continuing to give during the financially dry spells will solidify in you a spirit of generosity
that will carry over when you‘re cup is overflowing!

Whether you give to your church, your synagogue, or a charitable organization, just give. And even if
you‘re working the debt snowball, just stick to your budget and you‘ll be in good shape.

There are three things to do with money: spend, save and give. You have to spend in order to have the
things you need to live and should save in order to secure your family‘s future. But there‘s something
special about giving, something about the way it refreshes your heart and helps you see what is most
important. No matter the amount or the recipient, just give.


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