Frugal Boy had his six month checkup today and is in good health.
Mountie Frugal Boy
All of that playing has helped develop his body and mind.
thick as thieves these two are
At the doctor’s office Frugal Boy weighed in at an impressive 20 pounds and 2 oz (91%), measured 27.5″ long (86%), and had a head busting 18″ melon circumference (98%).
if it’s in my reach, I’m going to try and eat it
The main reason for doing these checkups is to get vaccinated against horrible diseases. In three months he will start a new round of vaccinations. I always thank the nurse who administers them because they are truly life saving wonders of modern medicine. Today I caught the nurse off guard, the office was crawling with people and she probably hadn’t been thanked all afternoon. Thank you’s are one area you don’t need to be frugal in!!
School starts tomorrow for our local K-12 schools. That means that you should be wrapping up your summer reading program. We finished ours and turned in our logs a couple of weeks ago. Some of the goodies that we got included a half pound of beer nuts, a free haircut coupon, and a free zoo admission coupon.
I didn’t finish Do Fathers Matter as there are only so many ways that the same conclusion can be reached in the span of 200 pages. I was in the mood for another personal finance book so I picked up a copy of Dave Ramsey’s The Total Money Makeover from our local library. For those of you who are unfamiliar with Dave Ramsey, let me give you a few bullet points about him.
He runs a self syndicated radio show that ranks in the top 10 in listenership
He has authored several New York Times best selling books about personal finance
He is anti debt
He is openly Christian and uses bible quotes in his books and on the air
His methods are controversial
The last point I will share my own thoughts as I walk through my summary of The Total Money Makeover.
What’s it all about?
Ramsey models the book after a fitness plan (there are many fitness analogies) and lays out seven steps to take the reader from debt laden to a golden retirement. The first five chapters cover some (un)common sense items about personal finance such as the importance of not racking up debt, ignoring the Joneses, the stupidity of gambling, and the importance of insurance. The next seven chapters Ramsey describes each of the seven steps of his plan along with some of the frequently asked questions. The last chapter paints a rosy picture of how good life will be once you have completed the makeover. It is also the chapter where his Christian ideologies come out in full force for better or for worse.
Step 1: Save $1,000
According to Ramsey, the first thing you should do to get out of debt and start building wealth is to put aside $1k for emergencies. Well, technically there is a step 0 where you have to get current, pay off any past due bills, on all of your existing debts. I digress. Ramsey spells out what qualifies as an emergency and what doesn’t. Christmas for example, isn’t an emergency because Christmas comes at the same time every year. The reasoning behind saving up $1k first is to keep you from sinking into any more debt when a real emergency such as your car’s strut coil blows out.
Step 2: The Debt Snowball
The second step of Ramsey’s plan is in my mind one of the most controversial points in the entire book. First I’ll describe the step as detailed by the author and then I will add in my 2¢.
With a $1k emergency fund in place, Ramsey suggests that the next prioritization to building wealth is to eliminate all debt. To do this, he recommends that you list all of your debts that are less than 50% of your gross annual income on a sheet of paper from smallest balance (e.g. $54 cell phone bill) to largest (e.g. $35,000 student loan). Then cut up all of your credit cards so you won’t use credit ever again. Finally, put every penny you can muster into paying off the smallest balance first while continuing to make the minimum payment on all of your other bills. When the smallest balance is paid off start on the next smallest and so on. If at any time your emergency fund dips below $1000, stop making extra debt payments and replenish the rainy day fund. According to Ramsey, most people should be able to finish steps 1 and 2 with two years.
Here is where I have some bones to pick with the author.
Number one, I don’t think that credit is the anti-christ. Ramsey tends to portray things in a very black and white world view; good vs evil, up and down, on and off. Credit cards are labeled as bad and dangerous when in reality they are no more dangerous than say a hammer. Sure, if you continually hit yourself or someone else in the face with a hammer, you can do a lot of damage. If you use the tool properly, it can make life a little easier for you. His assertion that debit cards provide the same level of protection as credit cards is incorrect. Yes, on paper they offer the same protection against fraud, but reality doesn’t line up nicely with what is written in the fine print. I had my debit card number stolen earlier this year and let me tell you what a pain in the ass that was. For starters, when a thief makes a bunch of charges using your debit card, that money is GONE from your checking account. Bye bye money, I hope you weren’t planning on buying anything important anytime soon. You contact your bank’s fraud department and they ask you a series of questions, then you print off, sign, and mail some affidavits to back up your claim. They credit your account with what is missing (assuming everything has gone according to plan) and you wait 4-6 weeks for confirmation that you really were robbed and the temporary credit will be made permanent. Compare that to when my credit card number was stolen several years ago. It was issued by the same card company. I called them up and reported the fraudulent purchases and because it was the company’s money that was taken, not mine, they took IMMEDIATE action.
With all of that said, if you are one of 60% of individuals who carries a card balance, aka you don’t pay the card off in full each month, then you should probably consider cutting up your credit cards. Hitting yourself with a hammer is no fun.
Number two, I cannot whole heartedly agree with his prioritization of debt repayment. Smallest balance to largest completely ignores the interest rates associated with the balance. Mathematically speaking, one should pay off the highest interest rate balance first and continue down the line until they are at the lowest rate. Logically, my way saves more money and would have debts paid off sooner, but humans are illogical and the psychological boost from paying off small debts probably does help individuals tackle the harder larger debts later on.
Step 3: Finish the Emergency Fund
Once all your debts except the house are paid off, Ramsey encourages the reader to finish funding their emergency stash. For the average American a full funded rainy day stash will be between $10-15k. Ideally that money should be kept in a savings, checking, or money market (with check writing) account for easy but not too easy access. CDs, bonds, and dresser drawers are not recommended because they are either too easy or too hard to access money in an emergency.
Step 4: Invest in Retirement
Only after paying off all debts except the mortgage and having a fully funded emergency fund does Ramsey suggest that you start contributing to a retirement account. Even if your company offers a match, he still doesn’t recommend contributing until the first three steps are complete. I have another beef with this because you are giving up FREE money for the sake of having debts paid off a month or two sooner. If I had to pick just one point of contention between Ramsey and other talking heads in the personal finance world, it would be concerning his investment advice. Ramsey swears by large cap growth mutual funds and their ‘unshakeable’ 12% annum return. Many of his calculations later on in the book use this magical 12% number to support ostentatious claims about golden retirements on small monthly investments. In fact, Ramsey only wants individuals to contribute 15% of their gross income to a tax preferred retirement account because that will be sufficient. If you have ever played around with a retirement calculator, you know that a change of even 1% return compounded over 20-40 years will have a HUGE impact on the final outcome. Consider for a moment that the de facto number used for most stock market investments is 8% and you have a pretty glaring difference between what Ramsey is preaching as truth and what may be truth.
Step 5: College Funding
If you don’t have kids or they have already graduated college you can skip this step. Going along with step 4, Ramsey discourages the practice of prepaying tuition at todays rates in favor of investing in a large cap growth mutual funds via an Education Savings Account, or ESA. His justification is that prepaid credits will only earn the rate of college tuition inflation, 8%, which is less than his superior 12% mutual funds. While 529 plans are okay, he thought they were too restrictive, mostly because they don’t allow you to arbitrarily pick investments like an ESA does. An ESA isn’t without restrictions. For starters, you can only contribute up to $2000 a year. Unlike 529s, you cannot roll the money over to another beneficiary. If money remains when the ESA beneficiary turns 30 years old, it must be withdrawn at a 10% penalty on top of regular capital gains taxes.
Either way, I would highly recommend that parents set up something for their kids education expenses. Student loans are a great catalyst for a life in debt.
Step 6: Pay off the home mortgage
If you forgive the fact that we haven’t cut up our credit cards (because we pay the balance each month), then this is the step that we are currently working on.
whittling down the mortgage
As you have probably learned by now, Ramsey despises debt. His first recommendation is that people should avoid mortgages and put down 100% cash on home purchases. Failing that, they should secure a 15 year fixed rate mortgage and work to pay it off early (that’s the route we went). One of the interesting conundrums that this step is challenged with is how one secures a mortgage if they have religiously followed the above steps. By closing all credit accounts, one’s credit score will drop. A low credit score makes it more challenging to get a prime mortgage. Ramsey’s ‘solution’ is to find a small bank or credit union that still does in house underwriting without relying on a FICO score. To me, this sounds like scuttling around the issue. Sure, there are probably some financial institutions out there that won’t pull your credit score but c’mon, most of them will.
Step 7: Build Wealth
By now you should be completely debt free, including your house, your retirement is on track for a dignified exit from this world, and your children are set to graduate from college with no student loan debt. Invest, spend, and give become the motto for this step. Continue to build your wealth but take some time to spend money on yourself and the wants that you have denied yourself for so long. Finally, Ramsey encourages a healthy dose of charity to help those that are less fortunate. In Ramsey’s eyes, you are considered wealthy when your money makes enough for you to live on.
Conclusion
So there you have it, one of the most popular financial planning books on the shelves. Is it a perfect one size fits all plan? No. Would I recommend the book to someone caught in a debt vortex. Yes.
Share your thoughts on The Total Money Makeover plan in the comments. What step are you on?
Just last week we were walking through Babies R Us (aka the Amazon showroom) to look at child seats because Frugal Boy has almost outgrown his infant car seat. We have also been on the lookout for a cheap high chair so that Frugal Boy can get out of our lap during dinner time and better participate in mealtime without clawing at our plates. Out of curiosity I took a cursory glance at the high chairs in the store and found the cheapest one with legs to be about $80.
The next day on our nightly walk we passed by a neighbors garage sale and there just happened to be a wooden high chair for $20. We scooped it up and carried it home to get it ready for its latest occupant.
Sans Tray
I removed the swinging tray and took it out to my little workshop in the garage. The tray had a slim piece of veneer that had been crudely glued into it and this made the perfect gaps for crumbs to sink into. I removed the veneer and the copious amounts of glue so I could repaint it.
Shae on the other hand set to work making a seatbelt system to hold Frugal Boy in place.
I really appreciate having a crafty wife. On our trip to the craft store we couldn’t help overhearing the clueless boyfriend/girlfriend couple who were attempting to make patio furniture (probably something they saw on pinterest). The poor store clerk told them that the interior fabric and padding wouldn’t work outside. Then later on they had no idea how much fabric they needed. “Enough to make five pillows.” Well how big are those pillows going to be?
Anyway, back to the point, I love a woman with a plan.
Here is a test fit of the restraint system with a live and very wiggly load.
After the paint was done drying, I was able to add the tray back on.
I don’t really care if he gets any wheat circles into his mouth. Just keeping him busy and letting us eat dinner is good enough for me.
Buying a car is almost inevitable in America today. Sure some city slickers can get by with public transportation, but for the majority that isn’t the case. If you are buying a car, then that means someone is selling a car. This week, we filled the shoes of the seller as we looked to send our 15 year old sedan out to pasture (or maybe it was to the slaughterhouse).
Trade, Private Sale, Donate, or Scrap
There are four common ways folks “sell” their used cars.
Trade
The first is to trade it in to a dealership for either cash or collateral towards a new purchase. The pros of trading a car is that it is fast, dealerships are ‘safe’ in the meaning that you won’t be literally robbed, and it requires the least amount of leg work. The con of trading a car is that you as the seller pay for the convenience. You will not get as much money because the dealer wants to make a profit on the trade.
Dealerships will take that trade in and either list it on their lot or sell it at auction (especially if it is a make and model that they do not specialize in).
Donate
Another route that some people choose (one of my brothers included) is to donate their used car. Often times, donated cars are past their prime and have little value left in them. Depending on the organization that it is donated to, you may be able to write off some of the value of the car from your taxes. If you have a charity budget, you might be able to lump it into your charitable giving and ‘convert’ it into cash value that way.
Scrap
This option is for cars that are dead. They do not run or cost too much to get into running order. Junkyards may be willing to pay a few hundred bucks to be able to pick over the carcass of this once majestic beast. End of the line, if you are scrapping a car, it has hit rock bottom.
Private Sale
Finally, there is the private sale. In a private sale, you the owner act as your own 1 man or 1 woman dealership. You advertise the vehicle, find a buyer, take care of paperwork, and hopefully make a sale! The pro of a private sale is that you will likely make more money. The cons include more work, some degree of risk, and a longer time table.
We knew pretty early on that we wanted to do a private sale.
Step #1 – Do Your Homework
Before you list a car for sale, you need to know a couple of things.
Where is the title? Who is listed on the title? Are there any liens on the title?
What condition is the car in?
What is the car worth? What are similar cars going for in the area?
#1 was easy for us. The title was in our safety deposit box, and we were the sole owners of the car.
#2 we knew that the car was in rough but working condition. The whole point of deciding to sell the car was because we were tired of sinking money into repairs.
#3 The fastest way to get a starting number for this is to go to Kelly Blue Book. This also highlighted the discrepancy between trading and private sale.
A “Fair” condition trade in vs “Fair” condition private sale
and here is the “good” condition trade in vs “good” private
There is almost a $1000 difference between trading in and selling it yourself for this particular car!
Step #2 – Clean!
Americans live in their cars. Long commutes, constant errands around town, and a deluge of pet hair, kids snacks, and shoe debris build up a strata of crud over the ownership of a car. New owners want a new car smell, not mashed cheerio paste. We started by emptying out the car of all our personal belongings and giving it a thorough cleaning. Start on the inside and wipe down all of the glass, vacuum out all of the crevices, and remove all of those old window decals. Once the inside it properly clean, take it to a car wash and get the fanciest wash possible. A super duper unicorn tear wash set us back only $12 but made the car really spiffy and shiny. Immediately after the car wash, stop and take pictures of those shiny wheels. Here is our advertisement picture showing off the tire tread of the wheel. The picture was taken 20 feet from the car wash. That leads us into step 3.
Step #3 – Lights, Camera, Action
Now that the car is at its cleanest, it is time to take pictures. Find a picturesque location (not your driveway) and take some glamour photos. Follow good photographer rules of thumb. Shoot with the sun behind you, frame the car nicely, and use plenty of natural light.
Now that’s a car that stands out!
Include lots of photos. If you aren’t sure what should be photographed, take a look at a dealership’s website and see what they take photos of. Try and mimic a dealership. Take more photos than you need so you can pick out the best ones later. I ended up posting 19 photos with my ad.
Step #4 – Craft The Ad
Once upon a time, people use to stick a “For Sale” sign in the window of a car along with a phone number and wait. Folks still do that today, but there are better ways of getting the message out. We chose to utilize Craigslist and a similar private classified that is limited to Shae’s workplace (we’ll call it XYZ). The bulk of what people look at on a listing are the pictures and if we did a good job on the previous step, then they may be interested in what the text of the actual ad says. It is here that you should list all of the great features of the car while sneaking in any of the standout issues that it may be having.
Here is our ad text:
Have a young driver heading back to school soon? This sports edition altima is the car for them!
• 142000 miles (below average) • Leather seats • Tires have good tread • Gas sipping commuter (24/31 MPG) • Aftermarket stereo, plug & play w/ phones • New front suspension • Fun to drive!
This car has been well maintained with synthetic oil changes every 6 months for the past 5 years. It has a brand new battery, front suspension, tie rods, wheel hub, and a recent alignment. The AC does not work and the rear brakes are nearing their service date. Front brakes are good and it has plenty of stopping power. Spark plugs have another 40-60k miles to go, tires have another 20k. New air filter, premium wiper blades, and all fluids have been topped off.
Other features:
• Cruise Control • Driver & passenger air bags • Alloy wheels • All around disk brakes • Power windows • Power driver seat • Power mirrors • 60/40 fold down back seat (you can fit a lot in this car!) • Full sized spare • Very little rust or fading • Car alarm • USB port in stereo • CD/MP3/AM/FM • Non smoking • Clean & ready to roll!
Title is in hand just waiting to be signed over. Cash or cashier’s check. Call, text or email to see it and take it home!
Notice how it is succinct but still gives plenty of information. Prospective buyers will appreciate that you are upfront about problem areas and will likely tunnel vision onto those instead of examining other parts of the car. Color me skeptical when I read listings for 15 year old cars that state it is in perfect running condition. Sure it is buddy, whatever you say.
In general, I find the oreo style of writing to be very easy and effective. Sandwich any negative bits in-between good ones. A prospective buyers attitude will be positive after reading the first good bit and that will help carry them through the negative bit before finally washing that away with a final good bit again.
It is important that you list contact details so prospective buyers can get a hold of you if they are interested. From the time we posted the ad on Monday to when we took it down on Thursday night, we had 11 individuals contact us.
As expected, Craigslist generated more hits than the private classifieds.
The best offer, and the one we accepted, started with an email from one of the XYZ hits. In fact, of the three offers that we ended up receiving, each one originated from an email contact.
Step #5 – Sell the Car
Answer emails, texts, and phone calls from prospective buyers. Arrange to meet them in a safe place such as a mall parking lot so they can see the car in person. Ride along for test drives and be prepared for low ball offers. If you did your homework at the beginning you should have a good idea of how much the car is worth.
After a little negotiating we ended up selling the car for $1800, $36 above KBB value. The new owner will have to put some money into repairs, but they also are saving quite a bit by buying from those “sketchy” folks in the parking lot versus going to a car lot. I looked up the same year, make, and model car at dealerships around us and found one with similar mileage listed for $3800. Sure that could probably be haggled down a bit, but the buyers saved a boatload by doing their own legwork and dealing with us. We earned money by selling instead of trading. Everyone wins! Yay capitalism.
Step #6 – Tie up loose ends
Make sure all paperwork is filled out properly when you exchange keys and money with the buyer. We filled out a simple bill of sale, a notice of sale, and the title. After the sale is done, mail the notice of sale to your secretary of state and notify your insurance company to stop coverage on the car.
Conclusion
We cleaned the car on Sunday, listed it on Monday, and had cash in hand on Thursday night. It is fun to take on new challenges with your spouse and I find that those challenges usually help strengthen a relationship. If we can sell a car, then you can too!
August is National Breastfeeding month and we have our own little duo that is happily participating.
The American Academy of Pediatrics, or AAP, recommends exclusively breastfeeding for the first 6 months and then continuing to breastfeed with the possibility of supplemental foods until 12 months of age.
According to the CDC’s 2014 report card, the average number of American babies that are breastfed at any point in their lives is 79.2%. By 6 months of age, the likelihood that a baby is being put to the breast at any time of the day reduces down to 49.4%. At 6 months the number of exclusively breastfed babies, those that eat nothing but breast milk, is a little less than one out of five (18.8%).
Clearly there is a bit of a gap between the AAP recommendation of 100% for EBF, exclusively breast fed, and the actual reported number of 18.8% and that in my mind is the point of having a breastfeeding month. Formula companies have an advertising budget and can run tv spots, boobs can’t. So consider this post our advertisement for the original happy meal.
For starters, it helps to move past some of America’s prudishness. Boobs, boobs, boobs, boobs, boobs!!! There, I said it. Women have them for two reasons. 1.) to signal that they can bear and raise children, and 2.) to feed the children that they bear. Thankfully my wife has no such prudishness and will happily feed our son when he is hungry despite where we may be. Take this park bench for example!
Or how about the backseat of a car (don’t worry, it was parked)
Hike or no hike, it doesn’t matter.
What about when moms not around? Here is our stash of pumped milk before Shae’s maternity leave ended.
Three months later and that supply has been all used up so now we are toeing a fine line of pumping supply and demand. Frugal Boy hasn’t quite reached 6 months yet, so the chances that we will start giving one or two feedings a day of formula are creeping up. Will we make it into that elite club of 1/5 that EBF to the recommended age of 6 months? Not likely, but we got pretty close.
Even partial breastfeeding confers a myriad of benefits including enhanced brain development and decreased sickliness. It was very tempting to throw in the towel at the hospital when Frugal Boy was hungry and the milk supply hadn’t kicked in yet. Another period of difficulty was when maternity leave ended and we had to transition to bottle feeding breast milk. In my opinion those are probably the two biggest traps that grab 4/5 moms.
Now that Frugal Boy is closing in on 6 months and has his first tooth, we have experimented a bit with solids. Here he is having baby oatmeal for the first time.
Mmmmm
We still haven’t given him a daily feeding of solids and he doesn’t seem to mind.
A little while back one of our friends proudly stated that their one month old baby slept 7 hours straight that night. I can guarantee you that baby is formula fed. Breast milk is easily digestible and no sooner is it in that little tummy it is being processed and used up. The result is that Frugal Boy still wakes several times every night to feed. So why do we sacrifice so much sleep? For starters, Frugal Boy weighed in on the bathroom scale this morning at 19.4 pounds. That is the equivalent to an A or A+ for his age. He is a very happy and intelligent boy. Finally, we are saving a ton of money by not buying formula. Do formula fed babies score A’s on growth charts and developmental milestones, sure they do! Is that something we want to do? Absolutely not if we can avoid it.
If you breastfed your babies thank you! If you are currently breastfeeding, keep it up! If you tried and switched, thanks for giving it a go! If you weren’t considering it at all, learn more about the benefits to both mom and baby!