Debt

Financial Education

My wife and I started attending a bible study on Wednesday nights a couple of months ago. It runs just under 2 hours, and attracts a large group of people. We’ve enjoyed attending immensely, but I have to say, last nights class was my favorite discussion yet.

FINANCES! I would have never expected that this would be one of the topics we would cover. I expected it to focus on tithing, but it was equally, or more, focused on getting out of debt.

Did you know in the bible:

Faith is mentioned under 500 times
Prayer is mentioned about 500 times
Money is mentioned more than 2000 times

So, I guess it’s an appropriate subject for bible study.

The pastor explained how he and his wife were in debt $250,000 at one point, living in a rental home, with creditors calling daily. Here’s how it happened:

He landed a great graphic design job right out of high school (he went to a vocational school) and a couple of years later, he and his new wife moved into their first home. He began to fill that home with expensive toys. He took pride in these material objects, enjoying being the guy on the block with all of the cool stuff. He got in the habit of spending more than he earned, ended up getting over his head, and losing everything. He lost the house, the cars, the boat, etc. He said it was the lowest point of his life, and that he could understand why people consider suicide. He began working two additional jobs so they could pay down their debt. During this time, he also began praying, going to church, and even tithing. In fact, the week he began tithing, he was called into his boss’ office and fired. He couldn’t believe it, he felt like he should be getting blessing that week, not fired.

The owner explained that they hadn’t made money in 3 years and he was sick of losing money because of the company. Not sure what to do, he pleaded for his job and explained to the owner numerous ways that he thought he the business could be improved and made profitable. After hearing him out, the owner said, “if you think you can do such a great job, why don’t you take over the company’? He told the owner that he didn’t have any money, and the owner’s response was, ‘I didn’t ask you for money’. He ended up making more that first month he was running the company than he made in all three of his jobs the previous month. That allowed him to quit his two other jobs, and spend more time fixing his relationship with his wife, and getting involved in the church.

They focused their income on paying off all of their debts, and succeeded in paying everything off, including their mortgage, in 7 years. They then bought a new house, and began renting their other house. The $1,200 of monthly rental income was added to their mortgage payment, and they paid the new house off in 8 years. They used that same technique with another house, and now have 3 homes paid for. Now financially independent, he became a full time pastor.

He didn’t give us his testimony to brag. He wanted to show that having even a basic understanding of finances can improve your life dramatically.

I could see that he was getting people in the room excited to pay off their debt. He even provided a debt reduction worksheet to help people get on a plan. This was a real world financial education being taught in bible study. He was careful to explain that where your treasure lies, your heart will follow. And that you don’t want to be in love with money, but to be a good steward with what God has provided you.

Career

My Wife Graduated!

I should have posted this sooner. The commencement ceremony was last weekend, and we had a nice party afterwards to celebrate the special occasion.

My wife received a psychology degree from a UC school; graduating with a 3.5GPA. She currently has a good paying, flexible outside sales position, but wants to get into pharmaceutical sales. I have no doubt that with her education background, leadership skills, and personable disposition, that she will be successful in any endeavor she wishes to pursue. Plus, she’s gorgeous, so that helps too.

Great job sweetheart!

Money Musings

Fool Me Once, Shame On You. . .

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I was reading about scams the other day and it got me thinking.

I don’ t believe I have been duped many times, but a story that immediately came to mind was a time I was took for $20, and gave it to the guy with a smile. A few years back, when I was living in an apartment, my roommates and I were kicking back in front of our place when a guy walked up looking sweaty and tired. He explained to us that he was our new neighbor in a unit just across the pool, and had run into some bad luck. His moving van ran out of gas down the hill, and he was trying to get everything moved in to his new place before he had to work that evening. He asked if he could borrow $20, and repay it the next day. Wanting to be a helpful neighbor, I gave him $20 and wished him luck. After a couple of days of not hearing back from the guy, I began knocking on the doors of the apartments across the pool. No one had heard of a new neighbor moving in, or had seen the guy. I couldn’t believe how gullible I was. It wasn’t so much the $20, but the fact that someone would take advantage of another person that was trying to help.

Another story that came to mind was the time my buddy bought a VCR (before DVD’s) from a guy selling them out of the back of his trunk in a parking lot. My friend gave the guys $50 for a new, unopened VCR. He raced home, excited to test his new purchase. Upon opening the shrink wrapped box, he realized that instead of buying a VCR, he bought a VCR box filled with bricks. Granted, he deserved what he got for buying what would likely have been stolen merchandise.

Do you have a good story of a time you have been coned?

Carnivals

The Carnival Of Personal Finance, #106

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Special thanks to Silicon Valley Blogger at The Digerati Life for doing a superb job hosting the 91 Ways To Wealth: The Carnival of Personal Finance, Epic Journey Edition. Out of 91 posts, I’m proud that my post Credit Reports and Credit Scores was selected as one of the Editor’s Choice.

Thank you also to Clever Dude, Blunt Money, and Cheap as chips for picking my post as a one of their favorites in the carnival.

401(k), Investing, Roth IRA

Investing Plan – Update

We have made good progress with our Investing Plan, and have tweaked it a bit along the way.

401(k)
Our 401(k) is currently at $13,184.13. We have increase our contribution from 2% to 3%, effective July 4. To better diversify our 401(k), we have reduced the percentage allocation of each mutual fund, and added a couple of additional funds. Our current holdings are:

16% – JH Lifestyle Aggressive (1.47% expense ratio)
16% – Pacific Rim Fund (1.46% expense ratio)
16% – Real Est. Securities Fund (1.19% expense ratio)
20% – Natural Resources Fund (1.49% expense ratio)
16% – International Small Cap Fund (1.55% expense ratio)
16% – Small Cap Index Fund (0.95% expense ratio)

I really dislike the high expense ratios of my 401(k) choices, and I was surprised to find they increased on some of the funds since my last post, and went down on others.

My wife is eligible to enroll in her company’s 401(k) plan in October. She will get a 100% match on the first 3% and a 50% match for the next 2%. Needless to say, we plan to invest 5% of her paycheck to get the company match (free money).

Roth IRA’s
My wife and I have opened Roth IRA’s thru Vanguard.

For my wife, we invested $3,000 in Vanguard 500 Index Fund Investor Shares (VFINX) (0.18% expense ratio).

And for me, we invested $3,000 in Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) (0.19% expense ratio).

We hope to have both Roths fully funded by the end of the year.

Taxable Accounts (Brokerage, Prosper, etc.)
Our 300 shares of ADVENTRX Pharmaceuticals (ANX) are now worth $798.00. My parents gave me this stock, and have a large amount of money invested in this stock. Since they first bought in, the stock has almost doubled. They expect it will go to $10/share. That would be sweet.

My wife and I invested $100 in two Proper loans. Both loans are current and our average interest rate is 12.23%, which is great, but for a variety of reasons, I’m glad we didn’t invest more money.

Savings Accounts
With just a $1,286.79 balance, we haven’t made as much progress on our saving as we would like. Most of our spare money has gone to funding our Roth IRA’s. We should be able to build this up the 2nd half of the year. Our goal is to eventually have a $10,000 emergency fund.

We feel that things are clicking along nicely. We’re working towards our goals, while not having to overly sacrifice. God willing, this success will continue.

Deals and Bargains

Free Gas

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Another benefit that we received as a result of purchasing the new (old) car is $35 worth of FREE gas. The credit union we funded the loan thru gave us a $10 gas card since a friend referred us to them, we also received another $25 gas card since we opened an auto loan within 30 days of our new credit union membership. They’re not big perks, but they’re free.
Roth IRA

Opened Roth IRA

As you may recall, we opened a Roth IRA for my wife last month. I’m happy to report that we just opened a Roth IRA with Vanguard for myself as well. I invested in Vanguard’s Total Stock Market Index Fund (VTSMX).

We had planned to open my Roth IRA next month, but I received a $1,000 reimbursement check from my company a month or two before the business expense will post to my credit card. So, we used the $1,000 reimbursement check and $2,000 from our savings account to open my Roth IRA. The $1,000 business expense will be paid off (using savings) as soon as it posts to my credit card. In the meantime, it has allowed us to open my Roth IRA a little sooner than expected.

So, my wife and I each have $3,000 in our Roth IRA’s thus far for 2007. We plan to contribute another $1,000 each in the coming months to fully fund our Roth IRA’s for 2007.

Health

The Benefits Of Acupunture

My wife has suffered with severe allergies her whole life, and none of the prescriptions her doctors have provided gave any lasting relief. She began going to an acupuncturist a little over a year ago on the recommendation of a friend. I’m a bit of a skeptic, so I didn’t expect results from such an unusual field of medicine. Acupuncture seemed so foreign to me and more of a novelty than anything. However, after a few visits, she was able to reduce her allergy medicine and, eventually, quit taking the medicine altogether. I was surprised at the results – there was no doubt that she was feeling much better.
Fast forward to March 2007 (when we combined our finances): My wife quit going to the acupuncturist because she was feeling better and wanted to help us save the money. As a result, her allergies have begun to worsen again. That being said, we have decided to add the $60 acupuncturist visit to our monthly budget beginning this month.
Although I wouldn’t believe it if I didn’t see it, this is money well spent.
Goals

Steady Progress

Although I only post our net worth in this blog once a month, I check our progress almost daily. Well this morning, we broke $20,000 ($20,235.09 to be precise) in liquid assets (Pre-tax Retirement Accounts, Roth IRAs, Taxable Accounts, Cash & Savings Accounts). Unfortunately, our net worth is well below this amount because we have liabilities that pull it down (0% interest credit card debt, student loan balance, and a mortgage that is slightly higher than what our condo is worth).

The details of this increase in our liquid assets will be noted in our new worth update post at the end of the month.

Income

Cashing In Some Vacation Days

My company provides 4 paid days off (PDO) each year. The vacation days are structured as follows:

  • After your 1st year, you receive 1 week of vacation

  • After your 2nd year, you receive 2 weeks of vacation

  • After your 5th year, you receive 3 weeks of vacation

I have been with my company for just over 6 years, and currently have 92.29 hours of Vacation/PDO saved up. My goal was to always have 2 weeks of Vacation/PDO available in case of an emergency. Today, I decided to cash in 48 hours of vacation so that we can start earning interest on it.

My company’s HR Department and Accounting Department are quick – I received the check this afternoon. The gross amount was $1,526.54, but after taxes, social security, and a mandatory 401(k) contribution, the net amount is $1,219.11. What a blessing. I plan to deposit these funds into our Emigrant Direct Savings Account, and eventually use them to fund my Roth IRA.

I can cash in Vacation/PDO whenever I want, but will probably limit it to 6-8 days cashed in a year. Effectively, giving myself a 1.9 % – 2.7% raise.

Our path to financial independence and retiring early.