Can Your Mutual Funds Really Earn 12%

"Is it possible, especially today, given 'the economy'..."

This is a very common question I am asked during Financial Peace University. Check out the answer here:

http://www.daveramsey.com/article/the-12-reality/lifeandmoney_investing/?ectid=bitlyified031320120944

Have we learned the lesson yet?

There are many articles that note with the economic downturn that household debt has been greatly reduced. And the hope is that we have learned our lesson well and cut the debt cord.

But have we? It looks like that hope is a bit premature...

http://moneyland.time.com/2012/01/12/in-november-we-racked-up-5-6-billion-more-credit-card-debt/

So on Black Friday retailers were thrilled to report consumers spent an unexpected $52 billion (with a "b"). Unfortunately, consumer borrowing surged $20.4 billion (also with a "b") in November - the highest month-over-month increase in a decade! Of the borrowing, $5.6 billion ("b" again) was on credit cards.

Maybe rather than cut the cord, we need to cut the cards!

I listened to an NPR interview discussing why we use debt for purchases. The person being interviewed felt two reasons at least included immediacy (not having to wait) and relativity (adding $100 to a $3,000 balance seems relatively small and therefore causes little concern).

The interview also discussed a new trend in credit card marketing called virtue cards - where instead of cash back or other incentives, a portion of the spending was donated to charity. This made people feel a little less selfish about their consumerism?

The Time article credited some of the credit card spending to a wave of 0% offers promoted by credit card issuers.

I guess the point is (and it sort of covers weeks 3 - 6 in FPU):

1) Wake up
2) Make a plan (budget)
3) Quit using debt (cut up the cards)
4) Be aware of and defend against the impact of marketing on your buying decisions

5 Frugal Valentine's Day Gift Ideas

Gifts holidays are always a little tough when you are working your way out of a mess. So, courtesy of the Dave Ramsey team via the Gazelle Gazette e-newsletter, here are...

5 Frugal Valentine's Day Gift Ideas

Last year the average American spent somewhere in the neighborhood of $70 on Valentine's Day.That may be within your budget, but spending money doesn't necessarily make it a happy Cupid day. Spending time, on the other hand, can do just that. If you're working your way through the debt snowball and don't have a lot of cash lying around, here are some tips for enjoying February 14:

Make dinner together – There's nothing wrong with going out to eat, but standing in line for two hours isn't the most romantic thing in the world. And don't even get us started on the jacked-up prices you are waiting to pay. Plan a candlelit dinner that you cook together. It's a great bonding experience that you can look forward to.

Go to less frequented places – You may not want a meal out, but what about going to a coffee shop for a quiet drink or dessert? The prices and crowds will be lower, and you have to admit that a sweet with your sweetie brings a smile to your face.

Write letters – Some people might feel cheesy doing something like this. They think it's best left to contestants on The Bachelorette who will not be getting a rose. But a letter to your husband or wife telling them how you feel about them or what you admire most about them is a nice gesture that they'll appreciate.

Movie night – There are tons of free movies you can check out from the library. Rent an old favorite and snuggle up on the couch. You might also check to see if there is a dollar-movie theater around that is showing an older movie or a classic title.

Check out the used bookstore – This might be a hidden gem of an idea. You both can stroll through and browse all the titles on the shelves. A few books are bound to stand out to you, and even if you're not a reader, some of the subjects are sure to be conversation starters.

When you get down to it, the most important thing is that you and your husband or wife spend time together. These are just some suggestions for making it happen. Since you know your marriage better than anyone, think of ways to nurture it.

And by the way, according to a recent poll, 87% of women say the gift they want most is just to hear, "I love you." Guess how much that costs?

------------

Let me add one more. The sweetest inexpensive date idea I have ever heard came from a law school friend who said when she and her husband were newly married and had no money, they would go on a date to the Hallmark Cards store. They would split up, find the very best card for the other, and then meet back up. They would read the card they wished they could buy and share why they chose it.

Even if you have plenty of money, that one just might make for a very special evening.

Happy Valentine's Day!

Cash flow planning help

After the cash flow planning / budgeting week, you may be a little overwhelmed by all the paperwork Dave recommends to manage your financial life...each month. People often ask me, "Do you really do this?" I can assure you that I do and I can assure you that I don't.

Let me explain. I don't complete all the paper forms, but I have a spreadsheet that includes all the forms and I plug our numbers into that every single month, adjusting until income minus expenses equals ZERO. And it takes just a few minutes. Carrie and I discuss it and agree to the plan. We use the cash envelope system, which reduces the workload through the month. And I can assure you that it works.

Keep in mind that once you get the kinks worked out of your budget many of the line items don't change. That is why I encourage people to do the hard work and commit to stick it out for 3 months at least before deciding how doable it is.

And when it comes to the envelopes, here is how we do it. When we take the money out for groceries for example, I count that full amount as spent for the month. I don't track our spending within the envelope, if that makes sense. Some people do. I don't. So instead of 6 or 7 or more transactions for groceries, I record only one each month. This makes the tracking very simple. And Carrie doesn't have to call and ask about buying something. As long as she stays within the cash allotted for a category, she has total freedom. She likes that!

Below are some online money management tools you may want to check out. They do the math for you, making the process of of adjusting to zero much easier. These are great tools that will help you to WIN.

• Dave Ramsey's Gazelle Budget Software (available free for members during FPU)

https://mrc.daveramsey.com/

This is the real deal right from the source. You get access to all kinds of tools, help and encouragement to keep you "Gazelle Intense" on your journey to Financial Peace. This is an incredible tool I encourage you to check out.

You can also buy the software on CD for $18.95 at http://www.daveramsey.com/store/budgeting-tools/budgeting-software/cBUDGETING-cBudSoft-p1.html

The CD software is PC-only. Dave often offers it on sale for only $10.

There is a "Lite" version of the budget form you can use without login at:

http://www.daveramsey.com/tools/budget-lite/

Just print it off after completing the form.

• Mvelopes

http://www.mvelopes.com/

This is another amazing online software system that is available for a fee. It can connect with your accounts online if you want for it to automatically download transactions. You can make adjustments from there if needed. It uses a virtual "envelope system" to track you budget-to-actual and keep you on track. You "fund" the "mvelopes" and spend from them online, making tracking very easy.

• Mint.com

https://www.mint.com/

Mint has become very popular because it also connects online with your bank and other accounts and because it is free. It automatically assigns expenses to budget categories based on the place of purchase (for example, if the purchase is from a grocery store it determines the expense to be groceries). You can make adjustments as needed. Mint does collect data about your finances anonymously, which is a concern for some.

• YNAB (You Need A Budget)

http://www.youneedabudget.com/

YNAB is available online or you can purchase the software for PC or Mac. It offers lots of online resources to help you understand how to use the YNAB system. YNAB is a great tool, available for a fee.

• Pear Budget

https://pearbudget.com/

Pear is a simple but powerful budget system offered for a small monthly fee. Pear Budget "Uses the classic “envelopes” method of budgeting, but updated for the web. Fans of Dave Ramsey love us!"

• Microsoft Excel or other spreadsheet software

If you are comfortable and familiar using spreadsheets and would like me to email you forms in this format, just let me know and I will send you what I use.

Some people like the manual forms. Others prefer different software tools. Find what works best for you and that you will use ongoing. Make it a habit!

Most importantly and this is true always...if you need any help or have questions, please contact me. I am here to help in any way I can.

Week 3...

As Dave asks, "If you managed money for You, Inc. the same way you manage money for you would you fire you?" Think about it.

Right about now is when you start to realize this isn't just fun and games, but it will really require real time, real effort, and real work! Financial Peace isn't a light-weight plan but requires you to do some heavy lifting.

If you were to make $1 million wouldn't you spend some time learning how to manage it? What should you do with that much money? What are wise things to do? What are stupid things to avoid? What will it take day-to-day to take care of that sum? Consider that over your working lifetime, you will undoubtedly make at least $1 million. That's right. Add it up. You will probably make quite a bit more than that.

You are doing the right thing by setting aside a mere 13 weeks to explore the issues surrounding money and sound management.

Fight through the cash flow planning forms if it isn't easy. Talk about money honestly and openly with your spouse if you are married. Do the hard work to make it work.

And keep coming to class! It will change your life! There is so much more to come, from insurance, to investing, from dealing with creditors to negotiating.

Are you going to do what it takes to win? I believe you will.

What controls your attention controls your life

Sometimes it doesn't pay to reinvent the wheel. So instead of writing my own post, I point you to this timely article. It is so true, and relates perfectly to our journey through Financial Peace University.

http://darrenhardy.success.com/2012/01/is-wolf-blitzer-hurting-america/#more

And that is why this 13-week journey can change your life. For 13 weeks your attention will be focused on managing life and money better - on paying attention to important things that matter.

What does it take?

So we've started the journey - and it is an important one. Many people want to give their entire lives to the Lord, including their finances, but they honestly don't know how. We are going to walk through the steps together and I believe these 13 weeks are going to allow many to reach a new place in their faith.

But it is not easy. Did you catch that one during the first Super Savers session? Or maybe it hit you as you considered things you learned this week, or in reading your book, or as you completed your Quickie Budget. It may take some big changes. And change is tough. And discipline takes a lot of determination.

I have walked down this path with hundreds of people through Financial Peace University and personal financial counseling. There is one common denominator in those who win and those who don't quite make it.

So what does it take? I call it focused intensity. It looks a little different for each person, but it sometimes resembles a sort of anger, or drive, or desperation, or attack mode. It refuses to give up or make excuses. It holds nothing sacred - but evaluates everything and it makes some serious sacrifices. It often takes overcoming some fear. And it may require a tough talk with that pouty and sometimes childish person you see in the mirror everyday (don't take it personally - I see him, too).

Are there obstacles? Yes. Are there valid reasons some of the recommendations won't work in your situation? Sometimes. Have you tried some of the ideas and been rejected? Likely. But focused intensity doesn't give up. It doesn't take "NO" for an answer. It doesn't let the excuses pile up and keep you down. It keeps trying. It gets back up. It keeps looking for new ideas. It never quits. It never gives up. And over time, I have never seen it fail.

How serious are you about changing your life? What will it take for you to save money? Or to move to the next Baby Step? What does focused intensity look like in your life?