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I can't win for losing

September 15th, 2013 at 06:28 pm

This isn't very financial in nature, though it definitely touches on financial plans.

The doors arrived and once unpacked were damaged, so the house updates are not even started. Most of the interior is painted, and DW has moved everything out of storage and back into the house. That's $132 (there was a recent increase) per month no longer being paid out.

We received news that MIL has breast cancer that has already metastasized to the lymph nodes. MRI coming soon to see the extent. DW will be going up to visit, so that's a plane flight that wasn't planned. Also, dog watcher to pay. Also, all the other associated travel bills.

Of course, DW had already allocated the main EF for her move back to the US, so we're hitting investment funds for this; not already-invested money, we're just not putting any more toward retirement while we get over this hurdle.

Luckily, I have a bonus coming within the month. That should set things right again, but some of it will need to be sent to Uncle Sugar for taxes. Just when we needed the cash, too.

At least DD2 has finished her move in to her new place. I'm sure she and DW are glad to be under different roofs. (editor's note: Why is the plural of "roof" = "roofs" but the plural of "hoof" = "hooves?")

We've postponed DW's return to Dubai so she can take care of her mom. Sometimes you just have to make sacrifices for the good of others. DW lost her father years ago, so her mom is all she has left.

Both of my parents are still alive. My father is doing very well; still very active in his late 70's. My mother, though, is having severe age-related memory problems. It is not impeding her apparent quality of life, but her lack of short-term memory is very noticeable. She's seeing specialists and on medication. My father says her symptoms seem to be arrested at the current stage. It's really quite sad to see this happen.

Getting old stinks, but it certainly beats the only alternative I'm aware of: dying young.

...And One Step Back

September 4th, 2013 at 10:34 am

Well, the elation didn't last long.

Just got a call from DW. It seems that when the painters showed up to do the back bedroom - let's just say that DD2's style doesn't match our own - they found a sponge where the wall should be in the closet.

Further investigation (tearing out not-so-drywall) revealed that there was some damage to the sill plate, and water coming from somewhere.

The good news is that it is not from the plumbing. Apparently, our AC drain is too close to the wall, and it's been seeping onto our slab and from there to the wall. It was caught early, but it's going to cost about $1K to fix it. If I were there... maybe $100.

Anyway, the main problem is to eliminate the situation and then repair the house. Total cost will include new sill plate, some dry wall, some texturing to match the existing wall, and the paint.

That doesn't sound like one thousand dollars to me, but it certainly looks like that on the quote sheet. I have to pay. This is yet another cost of living overseas while maintaining a house in the US.

Baby Step 15

August 31st, 2013 at 08:24 pm

Anyone who has listened to Dave Ramsey (insert evil or triumphant music here, depending on your proclivities), knows he suggests "baby steps" for paying off your debt.

As a reminder, his steps are:

1. Save $1000 for an emergency fund.
2. Pay off all consumer debt sans mortgage.
3. Save up 6 months of expenses.
4. Put 15% toward retirement.
5. Save for kids' college.
6. Pay off your mortgage.

The last time we were paying off debt - and now we're doing it again, but that was last month's biotch - we didn't follow his plan for the debt snowball (lowest balance to highest balance). We also didn't follow the debt tsunami (highest interest rate to lowest interest rate). We followed the "loans then lines of credit." DW and I figured it's easier to not ask for another loan (paperwork) than to leave a credit card alone (swipe! cha-ching!).

Fast forward to now. DW just bought a new car, made some home improvements, is buying some furniture, and loaned some money to DD2 and her DH for their new house home improvements. So, we have consumer debt again as well as our mortgage.

So, we're on baby step 15:

We're paying off her new loans at a good clip (yes, already): Baby step 2
We're saving up the emergency fund again: Baby step 3 (total: 5)
We're putting more than 15% toward retirement (baby step 4: total 9)
And we're paying down the mortgage (Baby step 6: total 15)

This is possible because the "great car compromise" included NOT buying another house. We aren't building that fund until baby step 15 (or at least through "9") is done. I think we've already got step 3 back in place, more or less. I still have the "float" and there is still quite a bit of "furniture money" in the checking account, so I'm not worried on those lines. I would like a bit more cushion, though.

We should be back on an even keel - only car and house, with full EF - before the end of the year, with both the car and house still being attacked quickly.

Won't Power

August 24th, 2013 at 07:19 pm

"Won't Power" is a new phrase I've just coined. It is the opposite of "will power."

How do you use your won't power? When you're at the store and you see a cute outfit that would be great for work, but that you don't have in your budget? You tell yourself, "I won't buy it." When you pass by the candy aisle at the grocery store, you tell yourself, "I won't need those calories." When you see the iPhone X come out, you say, "I won't need any new functions, my old phone still does what I need."

How do you develop "won't power?" You keep looking at the big picture down the road. Do you want a house more than you want those shoes? Do you want to fund your children's college more than you want that mocha latte? Do you want to get rid of your debt more than you want another 0.3 inches on your phone screen? Do you want to retire and travel to see your grandkids, or do you want to rely on social security to pay your electric bill?

I think I've got some problems keeping my won't power at full strength, but it's definitely better than it has been.

Lastly, the bane to "won't power" is "want power." If you really, really, really want that big screen TV, it's hard to muster the "won't power" to overcome the urge. Maybe tape a picture of your child and a photo of your diploma to your credit card. That should tend to limit the want power and reinforce the won't power, I would think.

There go the Trees

August 4th, 2013 at 09:33 am

When I was back in the US, I noticed some peculiar damage to the trees in our back yard. We live in Houston, TX, and the power company can come in and trim any trees away from power lines to help limit wide-spread, long-term outages when storms blow through.

Four of our trees, three oaks and a pecan, are on the easement, and they keep getting butchered every time the power company does their trimming.

The damage I noted, though, was near the bottoms of the trunks, but above where a weed eater or other lawn tool would hit; maybe three feet (one meter) up from the ground. The bark was splitting, leaving very large spots that had bare wood under them. Trees are very, very long term investments, so we scheduled an arborist to come out and look at them, in the hope that we could nurture the trees back to health.

The diagnosis is dire. First off, the "best tree," which is an elm off the easement and closer to the house has been hit by lightning, probably multiple times. It is dead on the inside, and the arborist said we have about two more years before it must come down. We're not waiting two years. The tree is too large to risk it falling, and I lost a porch on my last place because I went too long before removing a dying tree.

The four trees in the easement have been butchered badly by the power crews - I don't blame the crews, because the benefit to the majority of the people outweighs my personal losses. The damage is so bad that these trees, too, need to come out. Two of the oaks have lost their capillary layer, and just don't know they're dead yet. The pecan is structurally dangerous now, which we already suspected. I don't know what's wrong with the other oak.

Long story synopsis: I'm losing all of my backyard trees, and it's going to cost about $3K to take them out. I've already asked DW to go to the "good" nursery near our house to start shopping for new trees. We're probably going to put in fairly large trees, because we don't have 30 years to wait to have "real" trees.

The good news is that the trees in the front are healthy, including the oak I put in to replace a tree I had taken out 5 years ago after Hurricane Ike. So, the curb appeal is not affected, only the backyard ambiance.

DW has agreed to wait to pay cash for this, at least. It is not an emergency, so we're going to pay for it without hitting the debt cards. We'll probably have it done before Christmas.

I'm going to miss those trees.

Vent or Explode

August 2nd, 2013 at 01:31 pm

Arrrrgh! Just got off the phone with DW.

Begin rant

DW and I used to have very significant non-mortgage debt. Through diligence and dedication, we paid off or sold off well over $100K in a relatively short period of time. We've been "except for mortgage" debt free for quite a while, and the money has been going to retirement accounts and investments since then, as well as accelerating the mortgage pay off.

We were left with our only debt being a relatively low mortgage principal due. Late last year, I had worked out an amortization schedule on that (remember, I'm still an Excel nerd), and determined we could pay the whole thing off in less than a year. I ran some numbers on a refinance and determined that the interest rate reduction wouldn't cover the closing fees over the period we could reasonably expect to pay off the loan.

Fast forward to now. DW is back in the US setting up home again in our "old" house, and she's spending like a Congressman who doesn't have an opponent for the next term. Between the BMP loan to the kids, a new bed (gotta be Tempurpedic, not just memory foam), a new garage door (yeah, that's an emergency, right?), repainting the outside of the house that really doesn't need it except for cosmetic reasons (paint is for protection, not beauty), the two sets of new French doors, and her new car LOAN... well the EF is gone.

She's starting to use the credit cards. I told her that I'm NOT cashing in any of the mutual funds for this (after tax, no penalty, but we're not going to touch any retirement funds until we retire). I guess now she's going to buy all new furniture and probably have the driveway re-paved.... Sorry, that's hyperbole and frustration, not actual plans. At least she hasn't mentioned all new furniture (yet?).

Anyway, all the work to get us out of debt is being thrown away. I let her get the car loan in a compromise, and now she's continuing - no accelerating - the spending without any more compromise.

To top it off, she's even asking to decrease the amount we had agreed to pay toward the mortgage in the "great car compromise." For that one, I told her a flat-out "No, we're going to pay the amount we agreed to." I even "threatened" to pay the note from here rather than transferring the monies to her account which has all the autopays. She agreed to keep that compromise, but I think that she just wants to make those Jones next door envious.

End rant

Now that I have that out of my system...

There's nothing she's doing that we hadn't planned to do over time, but she wants to do it all right now. The problem is that she's putting us back into debt and also killed our EF at the same time to do it.

Does anyone have any advice for me when I talk to her next time? I swear, this feels like she's an alcoholic who skipped out on an AA meeting to go to a bar.

Trip back the US around the Corner

May 26th, 2013 at 06:16 pm

Well, DW and I are getting ready to head back to DS's wedding. We're going to do quite a few around-the-US trips as well. We got our airplane tickets and car rentals already arranged and paid for. Total out of pocket for two cities and about ten days is just at $700. That includes rental car, hotels, and plane. I used up some of my frequent flyer and frequent stayer credits for this, which made the price less than 30% of the fares and fees otherwise.

Our dogs go to the vet next week for their "preflight" check up. That should be all in order.

I have hired three people at work this week, and still have two more contracts to sort out. We're growing by the proverbial "leaps and bounds." My group has tripled in size since I arrived, and it looks like we're going to double again this year. That will be literally a 6 times increase in just two years. It's hectic, let me tell you.

DD2 has purchased a house. DW and I are going to give her $2K toward new floors. We're also helping DS pay for his wedding. June is going to be a "thin" month for us.

DW and I have worked out a compromise. She is going to get her new car. She's also going to live at our "old" house, at least until the car is paid off. We're going to use "her" money to go toward the car, then use "our" money to cover the remaining payments. Had we had more notice, we would have saved up for her car, but we're moving up her return to the US by six months due to circumstances beyond our control.

We also have to budget for her return trips to Dubai. I'll be staying on in our apartment over here. I've hired a "number two" in my group, and will be leaving him in charge when we return to the US. It isn't fair doing this right before we return, but he knew the score when we made the job offer. I'm really happy to have hired both him and our new operations supervisor. They wanted large salaries, but they're both worth it, in my opinion. Only time will prove out my beliefs.

Things are looking to be pretty good for June. I should know my bonus amount this week. I hope it is large enough to offset some of our upcoming expenses. It should be, but one never knows until the figures are written down and certified.

Financial Decisions

May 12th, 2013 at 10:54 pm

DW is planning to split her time between the US and Dubai. The summers here are oppressively hot, and she just doesn't want to suffer through another one. I, on the other hand, actually like the hot weather, and as I'm the one working, there's no real way I can go back to the US and work here part time.

Because of this, we'll need both a car and a house in the US. For some reason, DW doesn't want to live in the house we already own, and have nearly paid off. She wants a larger place for only her and our dogs. Her car is being used by DD2 and SIL, and DW doesn't want to ask for it back. I'm not even going to discuss my opinion of that. I gave my car to BIL (DW's brother) when we left to come here to Dubai, because there was no way I could sell it for what it was worth, and BIL needed it more than we did. No regrets on that front.

So, it looks like we'll need to buy both a house and a car upon our return for DS's wedding. I have DW convinced to buy the house first, at least, but because of that, we won't have the cash to buy her new car outright. I hope she will come around and let me get her a gently used car for $20K or so until we can save up enough for the car she wants (list price around $55K). If not, we'll end up with car payments and we'll have to beat those down while simultaneously attacking the last of house(1) mortgage and new house mortgage. At least we have no other debts to worry about. House(1) is nearly paid off. If it weren't for the need for the down payment for new house, we could pay it off completely.

So, DW is putting a crimp into our retirement plans. The only point we're in full agreement on is that we aren't touching any of the retirement accounts for this, and we'll still fully fund both Roths. She wants a place with a large fenced yard and a pool. We also want the place to be energy efficient, well-made... all the "normal" house desires. She also wants "close in to town," and "new construction." We're talking five times my annual salary to get everything she wants, and that's just not going to happen. She also doesn't want to work, which I don't mind. But she's going to have to "give" on at least a couple points or it's just not going to happen.

I should find out my bonus amount this month. That's going to decide a lot of what we're going to be able to do right away, and what we're going to have to put off until later. I'm hoping for a very large bonus.

Credit Scores

April 20th, 2013 at 04:06 am

DW and I were looking at our credit scores on Credit Karma or Credit Sesame (no way I'm paying for curiosity information). Her score is up to "deity" level. Mine is still somewhat below "hero," probably in the "champion" range.

Basically, her score shot up by about 35 points to the "nowhere to go but down" range. Mine is still "very good," but there's a lot of both up and down potential. When we look at the basis behind the scores, we both score A in every category.

I'll never understand credit scores. Our credit has been married for over 6 years. Anything bad on mine from before should have fallen off.

Good thing we pretty much ignore these things. There's something about walking into a car dealership and saying, "We don't care about payments. All discussions will be referencing bottom-line, drive-out , we're-done-forever pricing. If you send me into the room with the lady who wants to sell me undercoating, pin striping, and extended warranties, I'll say 'yes' to everything she asks. Just be aware, though, that the number you and I come up with is the final answer, so you won't get another penny above that, no matter what you throw in for free."

We're currently saving to purchase our retirement home outright. I doubt I'll need a mortgage broker, and the title company will be someone I hire, not one hired by the bank or some other entity. I guess I've learned that doing things yourself saves money.

Still wish I knew why my credit score isn't moving at all. We pay our present mortgage on time every month.

No spend week

April 9th, 2013 at 07:42 pm

Not that it took any real effort. I was in Saudi Arabia for 8 days. The day before I left, we put aside some food for DW, who never really makes much when I'm not home. This also meant no weekend date, either.

Of course, when I got back, I had gotten a rash on my wrists. Overnight, it spread to my arms, back, legs... basically everywhere but my face. That meant a trip to the doctor. The diagnosis is "contact dermatitis," which basically means I touched something that gave me a rash. I have no idea what I had touched.

Anyway, I now have four different pills and two tubes of cream I have to use. The cost? About a $15 co-pay, which I'm definitely not complaining about. I took all my pills and had a small snack for breakfast - I usually skip morning meals - but I'm not allowed coca-cola at all! I was down to about two cans per day (that's like a radical cutback, for me), but now I'm allowed nothing. We'll be shopping for that fruit-flavored water today sometime. At least "alcohol" was not denied me by the doctor, so I can still drink beer!

Going back to work today for a two-day workweek. Of course, not having had a day off for two previous weeks means that this isn't much of a bargain at all.

Home Improvements and Spreadsheets

March 22nd, 2013 at 02:06 am

I'm a spreadsheet nerd. When I make an important financial decision, the first thing I do is break out Excel and start to do comparisons and "what-if" checks.

My house in the US is up another $20K in value in the last two months by the online estimators and my own research into the neighborhood sales online confirms these figures. Also, its apparent rental value is up $200 per month. I already had a spreadsheet for the "sell or rent, which is better" scenario, and put the new numbers in it. As usual, when all factors are considered, there is only a $50 per month differential between renting out the place and selling it and investing the profits. I use a conservative 7% for my investment return calculations.

I opened a new sheet in the workbook and listed my electric, gas, and water usage from figures I could find online in my accounts. I've been making energy efficiency improvements to the house nearly every year since purchasing it. Honestly, I have pretty much run out of improvements to make. The house is in Houston, TX. I've added ridge and soffit vents. I've added a radiant barrier. I've upped the ceiling insulation to absurd depths. I've put in wall insulation as the bungalow was built around 1950 and no one used insulation back then. I have high efficiency everything including washer, refrigerator, air conditioner. I have double-pane, e-squared, argon-filled windows. I have one sliding glass door left to replace with some French doors, and my upgrades will be complete.

As I said, this was all done over a course of years. I finally got around to working out my total energy and utility usage for the place. I had paid as much as $400 for only the electric bill one month, though usually the electricity ran closer to $300 or slightly below during the summer months.

My spreadsheet did not disappoint me. My maximum TOTAL utility bill for the last two years was right at $170. That was only one month during the drought where my water usage was over $100. I told DW while we were doing the watering that "it's cheaper to water than it is to put in a new lawn."

My electricity provider went out of business, so I lost previous billing data, and cannot go back any further. The house is costing about $110 per month for total utilities: gas, electric and water. That's $200 per month right into my pocket when I move back. Right now, DD2 is enjoying this bounty with her husband as they house-sit while I'm overseas.

Since I started doing the upgrades, I have probably invested just about $30K in the changes. That means it is a 9 year payback at 7% per annum. I'm a good five years into the payback period.

Those improvements are as good as money in the bank, in a few more years.

Take That, Washington!

March 15th, 2013 at 08:34 pm

Well, at least this year living in Dubai worked out. I just finished my taxes, and I owe a whopping ZERO dollars.

Plus, I'm getting a refund. I usually don't take my refund, and leave it in for next year's taxes, so this year, the tax package I used didn't give me that option hence the fact my last year's "leave it in" option is now this year's "get it back" requirement.

I realize that leaving my "refund" with the IRS means the government gets my money tax-free, but they need it worse than I do, and I prefer to have a bit more buffer at tax time than most people. Besides, it's their money anyway. Just ask them.

Next year, I'm going to have to pay quite a bit in quarterly payments, which is a bit daunting for me. The way my pay is structured worked out for me this year. Next year (2013 taxes) is going to hit very hard. I hope they don't make too many changes at the last minute (sequester and end-of-year changes like 2012, anyone?) since the quarterly estimates are going to be hard enough to figure out without last minute changes.

There goes the Budget!

March 14th, 2013 at 01:27 pm

I got a call from DS a few days ago. He has decided to marry his (now) fiancee. They've been dating about three years. She graduates in May. They're getting married in June. At least they waited until after college to get married. DS has been out of Uni about three years, so he's just now hitting his stride on earning potential.

The problem is that we had not planned to come back to the US until July or August. Two months isn't a lot of time to change our plans, and we have promised to "help out" on the wedding. How much we help will probably depend a lot on how well DS is doing with his income. If he's making wise choices, we'll help more. If he's not making wise choices, we'll help less. We really can't make that decision from a distance.

DW and I are thinking of giving the new couple a gift of enrollment in Dave Ramsey's class. I don't really agree with 100% of DR's teachings, but you can't argue with success. I am about 99% sure DS has put himself in over his head in debt, due in large part to my past performance which he witnessed. It's never too early for him to start to think about retirement. There's no way to plan for retirement while "improving" your credit score.

Anyway, this is only a bump in the mortgage-pay-off road. If we get my bonus on time, then we should be able to overcome any difficulties that this wedding will cause with our budget. If we don't get the bonus on time (you'd have to know our CFO to understand why this is a possibility), then the timing of the wedding will hurt. DW and I have decided to slow down the mortgage pay off and concentrate on vacation/wedding savings instead.

I am certainly blessed to be saddled with the "good" problems I'm now facing. Of course, I've worked for over 30 years to get this overnight success. God's been smiling at me recently, and I'm really thankful for His help. (I apologize to those of you that might find this last statement offensive; however, I am obliged to acknowledge Him in my current situation.)

Death and Money

March 10th, 2013 at 06:41 pm

Sorry for yet another long post.

I have lived a very charmed life. My parents are in their 70's and are still alive, as are all of my brothers. Very few people who are or were close to me have died. Due to this, death is still very foreign to my experience, and any deaths that have occurred have left a profound impact on me.

In other posts, I've alluded to losing my girlfriend of many years when talking about my retail therapy binge. A recent thread in the forums (actually, I think the word is "fora," but no one uses it, so I won't either) got me to thinking about my outlook when it comes to money, which brought me to write this post.

My father came from a very large family. He had five brothers and two sisters. Most of them are still alive and in their 70's and 80's. When I was about eleven, my father's father (my paternal grandfather) passed away. The family all gathered at his small house and had the near-reunion that always accompanies the death of a family patriarch or matriarch.

With that many children in their 30's and 40's, and all of their children (my cousins), you can imagine the scores of people in my grandparents' house. I would say the house was about 1000 square feet, and two bedrooms with only one bathroom and one common area plus a kitchen. All of us kids were basically left to our own devices. The older teens wandered off to the local hangouts - there was a park nearby where they could go sit on the play ground equipment and smoke cigarettes unbeknownst to the adults back at the house - while us younger kids pretty much just hung around the house and probably made pests of ourselves until we were given something to occupy our time.

My cousin Roger and I were eventually dispatched to my grandfather's bedroom. We were given the task of clearing out his dresser. Roger was about a year younger than I was, and his father and mine were the two sons who had made decent livings for themselves. My father's family was not rich by any means, my grandfather being a retired police officer from the 1950's when pensions were small but sufficient; however, my father had put himself through university to get a BS and eventually an MBA, and my Roger's father had opened his own successful business. The other aunts and uncles, though, were basically living paycheck-to-paycheck like most Americans still are doing today.

While clearing out the drawers, Roger and I came across my grandfather's old service revolver. We were southern boys, so we knew about guns and merely set it safely aside with the other items we were cataloging. We also came across a "blackjack." I asked my father about it when we told him about the revolver (which my father put out of the reach of our younger cousins). A blackjack is a leather device that looks much like a very small dumbbell, and has a small weight made of lead - maybe a fishing lure weight - at either end of the "dumbbell." The wielder holds one piece of leather-covered lead, and swings the blackjack as a small club. The leather and the weight of the lead increasing the force of the subsequent impact. A blackjack is a close cousin of "brass knuckles." My father explained that my grandfather had disarmed the blackjack wielder after being struck by it, and had kept the blackjack as a souvenir. I can tell you no more of the fate of the blackjack wielder.

Roger and I continued to go through my grandfather's things. We came upon a pencil cup full of pens of various types. My cousin ran his fingers across the top of the pencils and pens, and remarked, "Wow! There are enough pens here that all of the grandkids can have one." Now, I immediately realized that Roger was thinking, "What can I get out of Grandpa's death?"

This statement had a very profound effect on me. I was disgusted with Roger. I must admit that to this day, I cannot look at Roger - we're both in our 50's now - without remembering this statement. My grandfather had died, and Roger was wondering "What's in it for me?"

About 15 years later, my maternal grandmother passed away. Although my mother's family was much smaller than my father's extended family, we still had the typical near-reunion gathering.

We dutifully gathered at my grandmother's house - not much larger than my paternal grandparents' house - and talked about my grandmother's life and death. My mother and her three sisters were going through my grandmother's things and I was told "to take something for myself." I demurred, but my mother insisted I take something with me. One of my brothers had taken the color TV, and another of my brothers had taken my grandmother's Buick.

I remembered as a kid, we would sit around listening and basically being bored as the older folks talked, and I would mostly stare at a "century clock" - also called an anniversary clock - that my grandparents had on their mantle. I was always fascinated with that clock and the small weights at the bottom that would spin one direction and then the other apparently forever. This clock was the one item I always equated with my grandparents' house.

So, of course, that's what I asked for. My mother's younger sister immediately chimed in very vehemently, "No! That's mine! I have already packed it away." Now, I had only spoken up because I had been forced to do so, and I had chosen that item because it was what most reminded me of my grandmother. Immediately upon my aunt's tone and statement, I saw images of my cousin Roger and his coveted pencil cup. Instead of the anniversary clock, I asked if I could have the "rag rugs" that my grandmother had made herself.

Rag rugs are made by taking old scraps of material and making them into long, thin tubes. The tubes are then braided, and lastly the braids are sewn in a spiral fashion to make oval throw rugs. After the clock, these rugs, hand-made by my grandmother, most reminded me of my grandmother, so that's what I asked for instead of the clock. Even with a lot more cajoling, I took only the three rag rugs. When asked, I said, "These are what remind me of Grandma, so these are what I want."

I have a few other stories and memories, but these two tidbits illustrate why I've never put much value on things or money. I really don't need much, and I never saw the reason to accumulate wealth. I was born smart and I have always had the ability to make as much money as I wanted to; I just never really wanted to make money.

Now, I'm setting aside cash for my retirement, which is why I came to SA. As I never saw any value to money, but realize rationally that I need to save some for my DW when I eventually pass away, I came here to Dubai. I love my job, but I've had other jobs I love more. When I leave here, I'll go back to training - my true vocation. I doubt I ever "retire," as I actually love being in front of a class and the interaction and challenges of putting across the information so folks can genuinely understand the material. It's just that here in Dubai I make enough money to easily save and that's really all I'm here for.

Exercise and Flying

January 26th, 2013 at 06:51 pm

I have been working out in the gym in our apartment building for the last week. This is after a 20 year hiatus from weight lifting, and ten years after doing any organized sport activity.

I ache everywhere. If you remember the old Dick van Dyke episode where he went skiing and got hurt, you have an idea of where it hurts. (Season 2, episode 22 if you have netflix. Don't Trip Over That Mountain)

I hope that continuing the visits will alleviate some of the pain.

Just saw an article on Yahoo. http://finance.yahoo.com/news/when-is-the-optimal-time-to-bo...

It says that you should book 7 weeks in advance for domestic flights (49 days) and 10 to 11 weeks in advance for international flights (81 days). I've heard that 21 days is best for domestic flights in the past. I have to book flights all the time, but it is usually at the last minute, so there's not a lot I can do to lessen my fare. Of course, it's business travel, so it gets charged to the job, but it comes out of my office budget, so I'd still prefer cheaper fares.

Hit the Emergency Fund

January 24th, 2013 at 06:51 pm

On January 10, a notice went up in the elevator that on 21 January 21, the barriers and building access systems would be activated, so you needed to have your cards.

I had applied for my card in November, but - with typical Dubai efficiency (NOT) - I still had not received mine. I waited until two days before the "drop dead" date to finally go to pick up the access cards.

Well, even though I had a receipt that said all fees were current up until July 9, 2013, it seems a new fee was due at the end of the year. Note that had they issued the card when I applied, this fee would not have been due, and I would not be in a position to need access cards in two days.

The fee due was about $4,000. I called my landlord who said, "No, I'm paid up through July." Yes, he had the same receipt. As I needed access, I paid the fees, then wrote a synopsis of the problem and copies of all bills and receipts to the landlord.

As I now had access to all of the paperwork, I worked out the amounts. My Landlord has to pay over $6,000 per year for maintenance fees, facility-access fees (gym, beach, pool, etc.), and parking fees. In addition there is a general-fund fee that goes to who-knows-what. How would you like to have condominium fees at that level? That's what the high price of living in Dubai is like.

Landlord has promised to refund the amount. I don't know when or how we can get the money, though.

DW and I went out and got groceries at a new store last night. They had American items like pop tarts and taco mix. We cannot even find chili powder over here - we did find cumin and cayenne, so we have the basics of our own - so we spent a bit on some "home country" food we wouldn't normally buy. It came to just under $200 for maybe 6 bags of nearly nothing. Just to give you an idea, a can of red kidney beans is over $4. DW likes beans in her chili, and also decided to make "Three bean casserole" this week. I don't think she realizes that instead of being a frugal meal, over here, it is going to run about $30 for a single casserole.

Anyway, we're now low on our EF for the rest of the month until the Landlord repays us for his fees. As an aside, we have to pay our rent in a single check for the year, so he already has our money until next November.

Lottery Winner

January 16th, 2013 at 12:01 am

There is an article out today about an unemployed guy buying an $8.00 lottery ticket and winning $1 million. Good for him! He got a check for $670K after taxes were withdrawn.

Now, I seem to remember that they just raised the tax rates, and a quick check on Yahoo finance shows that anything over $450K is taxed at nearly 40%. That means that he'll owe $340K to the US government alone, although only $330K was withheld.

Now, with any State income or sales tax, I'm pretty sure he's going to already be below $640K.

He said he tithed 10%. Assuming that was $67K (ten percent of his take home), he's now down to $570K.

He bought two jeeps: $520K. And now he's made an offer on a house. For convenience sake, I'll estimate $250K for that.

He just won the lottery, and he has no job. He has a paid-for house and $270K in the bank. I will guess he has a lot of credit card debt, so I'm going to arbitrarily put his bankroll at $220K right now.

How long do you think it will be before he's borrowing on his house to pay bills? I'm guessing no more than 2 years. After all, this guy immediately started spending after he got some green in his palm.

Dreams, Wishes, Goals, and Plans

January 13th, 2013 at 08:26 pm

I saw a post on the forums here where the OP stated (paraphrased), "I want to save more and buy a house some day."

That's a dream. Dreams are things we like to think about as if they might magically happen. Most of us like to dream about what we'd do with our money, jobs, and family (and to our bosses and neighbors, sometimes) if we win the lottery.

The idea of what we do here at SA is "goal setting." A goal is an objective with the following criteria:

1. A time frame in which to accomplish it
2. A metric that tells us what the goal actually is.
3. A plan that gets us to the metric within the time frame.

Taking the original quote above, we can turn it in to goals with plans instead of dreams with wishes.

"I want to save more" becomes "I will save $25 per biweekly paycheck, putting $1300 into a Roth IRA. I can do this by cutting out four beers (plus tips) at my local pub every two weeks."

The time frame is 1 year. The metric is $1300.00 in a Roth IRA. The plan is to cut back entertainment spending.

"(I want to) buy a house someday" becomes "I am going to save $50,000 within 10 years to purchase a $250,000 home with 20% down and no PMI. I will do this by setting aside $200 per paycheck in a mutual fund account with a target date of 2023. I will get the $200 by turning off my cable TV, scaling back my cell phone plan in 14 months when it expires, bringing my lunch to work 4 days per week, and quitting smoking."

The time frame is ten years. The metric is $50,000. The plan is to cut back on entertainment, luxuries, and bad habits.

Note that neither plan counts on pay raises, but also that neither plan expects a job loss. I feel that these two occurrences are "plan changers" whether to the good or to the bad. In other words, either event will require a re-working of the goals, metrics, and plans, but both are more or less beyond my direct control.

I used to be the first guy from the quote. I am pretty much the second guy, now, when it comes to planning instead of dreaming.

Do you know why most people don't hit their savings target? Because they don't aim at anything; they wish for it to happen.

So, when I buy a lottery ticket, I used to say, "I'm just doing a little retirement planning."

Exchange Rates and Spending

January 10th, 2013 at 07:29 pm

As I've said many times, I am a US citizen living in Dubai, United Arab Emirates. I have lived overseas for maybe 12 years in total over the last 35 years. You would think I would be used to different monies, and for the most part you would be correct. I can easily convert from one currency to another in my head, as I've traveled extensively and it is imperative that you be able to do such calculations to enable you to both stay on budget as well as not get ripped off in marketplaces.

The interesting part is that even though I know that 99 Dirhams (the local currency) is just a bit more than 25 US dollars (around $27), in my head I still THINK of it as if it were ninety-nine dollars.

Tomorrow, our "Saturday" - which is actually Friday on the calendar, but it is the first day of our weekend - DW and I have plans to meet some friends for a mid-day brunch. The whole gig costs 99 Dirhams per person for food and drink, but in my head I cannot help but think that we're paying nearly $200 for a day's entertainment and food.

This has the beneficial effect that I tend to buy less than I otherwise would. When I see apples for 14.50 per kilogram, I immediately think "$6.50 per pound for apples is a LOT of money" - my head also automatically converts metric to "real" units of measure such as we use in the US. Of course, it's really about $1.75 per pound as the 6.50 represents the local Dirham currency, which is still a lot of money for a pound of apples, but not nearly as bad as my head automatically applies to the price.

Too bad I can't transfer this to the US when I return. When I get back, $1.00 per pound for apples is going to be $1.00 per pound, and no brain-tricks are going to be able to help me.

Just as an aside, typical apples imported from the US can cost twice as much over here. Red Delicious from the US are about 29.50 Dhs per Kg, which is about $3.50 per pound.

Question While Listening to Dave Ramsey

November 26th, 2012 at 08:23 pm

I know his name is a curse word to many, but I like to listen to DR for a variety of reasons. The least of which is that I like to hear the stories of people who have gone from staggering debt to financial security with great effort. What I have learned is that most of them changed their way of living to become debt free, and it is that "change of modus operandi" that I listen for to decide in my head if the person screaming "Debt Free!" is going to remain debt free.

As I've posted before, I put myself into considerable debt over a relatively short period of time due to a variety of reasons. Lost job, contracting business that barely paid the basic bills, retail therapy, and plain ol' stupidity being four of the major causes. Note that my divorce didn't even make the top four.

Well, I sold some stuff including a lake house and a third car, both of which I didn't need, and concentrated on paying off the other loans and such. Right now, I have no debt except my primary mortgage. I'm within a year of paying off the mortgage. I have plans to start purchasing houses to use as rental properties during my retirement for an income stream.

I was listening to Dave Ramsey, and someone with a remote house and payment called to ask about selling the house or keeping it for rental income. Dave asked the caller, "Would you borrow to buy that house?" Now, simplistic questions don't fit every situation, and my situation is different.

I can pay off my mortgage 100% within a year. At that point, I plan to save up $80K as a down payment on a second house, which I plan to purchase when I return to the US. I have no plans to live in my current house again, but it is in a neighborhood that is appreciating at about 6% to 10% per year, plus I can get rental income of about $1000 per month after taxes and insurance. I see no reason to sell such a cash cow. I can reasonably make $150K off of it if I do sell it, though.

My secondary goal, after I save the $80K, is to start saving for a second and third home in the same neighborhood, for eventual retirement rental income. As I'm the spreadsheet king, I have the financials worked out fairly well.

So, after hearing Dave's question, I am questioning myself as to whether I am doing the right thing. I have basically no bills, so everything I make goes into investments such as mutual funds and real estate. I plan to be real estate heavy, because God stopped making land, but lots of folks are still developing mutual funds. I just feel more comfortable with a house in hand versus a number on a piece of paper.

What would you do? Pay off the mortgage and buy property, or sell the house and invest in mutual funds?

Or something altogether different?

Editorial note: I know that many folks reading this are in debt and would love to be having this "problem," but believe me when I say I have not arrived here without a ton of effort and not just a few months where I was glad that the light still came on when I changed the calendar. You're reading about someone who has made it down the road after a very rocky start and quite a few missed turns and flat tires.

How to Know You've Turned the Corner

October 23rd, 2012 at 05:31 am

How to know that you've turned the corner on your debt:

1. You look forward to the end of the pay period because you'll get to pay more toward a debt so it will be gone that much faster.

2. You see someone drinking a Starbucks Veinte and think, "How can someone spend over $7 on a cup of coffee?"

3. The phrase "Ramen noodles" no longer brings up memories of your college dormitory.

4. Any animal product for less than $1.00 per pound becomes part of your gym routine as you lift it into your cart.

5. The new car smell now makes you wonder the length of the loan and how high the payments are.

6. You use the past tense as you talk about money problems.

7. You save up for Christmas rather than dread paying for it over New Years.

8. Your kids stop complaining when you say "No," because they realize it won't get them the candy, toy, or new video game.

9. Your kid points out something on sale at the grocery store instead of complaining in the first place.

10. You read this list and say, "He forgot one."

Things You Can Do With Money

August 25th, 2012 at 08:40 am

It doesn't matter what you do in the world today, you have to deal with money in one form or another. Have you ever thought about what you can actually do with money? I'm not talking about dreaming what you'll do when you win the lottery. I'm talking about actually sitting down and thinking about money and what it entails.

I had a problem when I was younger of not paying attention to money. I've always been employed, and I've always made enough for my needs and wants, but I don't have extravagant needs or wants. Here, I'll outline what you can do with money, and what it entails. It is only a guideline to help you think about what you're doing, rather than just setting a goal and roboticly working your way toward it without any real understanding of what you're doing.

Money use 1: Borrow it
Since you're reading this blog, chances are that you're already well-versed with this use of money. Borrowing entails someone giving you money for your use today, with the promise that you'll pay back even more money in the future.

What do you get for this money? About the only thing is "immediate satisfaction." And debt. You always get the debt part, and you usually get the immediate part - "immediate" being a relative term - but you don't always get the satisfaction part. Have you ever purchased a used car only to wish two months later that you had not? Or maybe you used your credit card for a night out where you had a little too much to drink, and as you were ruining your shoes and your trousers or pantyhose, you regretted the purchase of at least one of the drinks? You didn't necessarily get satisfaction, but you did get the debt.

Now, there are actually two categories for debt, which I call "dumb debt" and "smart debt." How do you tell the difference? Basically, dumb debt - which is the vast majority of debt - is debt that costs you money and doesn't really do anything for you in a positive manner.

"Smart debt" is debt that you use to achieve some other financial goal. About the only thing that falls into this category is real estate loans. Now, it is arguable that stock purchase loans can also fall into this category, but I don't believe that is anything other than gambling, regardless of the odds. Real estate appreciates as long as you purchased it at its real market value rather than at an inflated going rate. See my previous "Dave Ramsey" blog post where I give a bit more information on this topic.

In most cases, borrowing money incurs only debt and hardship, so it is a dumb thing to do with money.

Use 2: Spend Money
This is not quite as bad as borrowing, and as long as you haven't done "use 1" too much, there's nothing really wrong with this use of money. Spending money entails trading a value of cash for some item, service, or other value that is not cash.

In general, spending money does not decrease your net worth, assuming what you get in return for the money has an equal value. Most assets, though, depreciate in value, so in the long run, spending money decreases your net worth over time, or at least prevents it from increasing more quickly.

Use 3: Saving Money
Saving money is what you do with money when you have it, and don't use it for another purpose listed here. Saving money in and of itself is a good thing. It entails putting the money somewhere safe where it cannot lose numerical value - though it can lose spending ability due to inflation being greater than the savings return.

Saving money puts money somewhere that you can get to it more or less "at will." Usually, you pull money out of savings once savings reaches some given point to use it for some other purpose. Often the other purpose is "spending" as above, which will probably cause your absolute value to go down more quickly.

Use 4: Investing Money
The main differences between saving money and investing money are rate of return, risk, and liquidity. Basically, the rate of return is how much you make for your invested value compared to its value; the risk is how likely it is that your rate of return can be negative. Liquidity is a measure of how quickly you can reclaim your money for another use (including re-investing it elsewhere).

Investing money is a personal decision. There is no "right answer" and there is no "right way" to invest your money. You have to balance your needs, your wants, your assets, and your obligations, and your personal ability to remove yourself from the equation. One of the hardest things to do is to watch an investment lose value, yet "stay the course" and not incur even more losses shifting money around to no avail. But that's all a part of investing.

Investing is one of the wisest things you can do with your money, but you cannot invest until you have "extra money" to invest. You should only invest money that you don't need for spending or saving. An emergency fund is not investing. It is savings for unforeseen events that require money. Paying off debt is not investing. It is the penalty you are paying for past immediate return.

The main thing about investing, though, is that it is gambling. You are betting that your investment gains value at a greater rate than inflation or the economy in general takes it away.

Now, the above statement is going to anger just about every investor who reads it. "Index funds have historically returned (blather) amount over any (X) years." Yes, they have. Absolutely every investment vehicle I've ever seen has also said, "Past performance is no guarantee of future results." Why? Because it is a gamble.

The thing about gambling, though, is that you can improve the odds by various means - most of them legal, many of them illegal. For example, you can run a casino and weight dice to insure a certain roll. That's an illegal way, obviously. Legal ways to improve your investment odds is to research your investments. The best advice I can give in this regard is to invest in something you know and understand.

Use 5: Earn Money
Earning money is performing some service, improving some item, or otherwise doing something that someone will give you money in exchange for. Most people have a "job" where they earn money. Earning money always increases your net worth or asset value. This is your best vehicle for increasing your comfort and ability to do all of the things listed above.

Your ability to earn has very little to do with your intelligence, your education, your network of friends. Your ability to earn hinges on three precise qualities that everyone possesses in one degree or another: Integrity, imagination, and dedication.

Integrity is listed first because it is the most important. Integrity is more than honesty and trustworthiness. It is the sum total of your character. "Character" has been described as your penchant for doing the right thing even if no one is watching. This allows people to trust you, work with you, and rely on you.

Imagination cannot be underestimated. This is the quality one has to see a situation, item, or other intangible or tangible object and apply a unique or unthought-of change that others have not foreseen. This is how ebay, Steve Jobs, and about 99% of the other "successful" people and businesses have made their way. Imagination is the ability to see something that hasn't been seen by others. Earning is your ability to exploit this vision to make money from it.

And that takes the last item: Dedication. This is your ability to stick with something because you know it's going to work out for the better. It is your ability to stay with things when they don't look good, but in your heart you know you can make them good. Dedication means staying with something because you believe in it, no matter what anyone else is saying or thinking.

Dedication is a two-edged sword. If you're wrong in your belief, then you are dedicated to a losing proposition. If you're right, though, you can look like a genius and set yourself up for a windfall. Unlike the gamble of investing, though, with dedication, you're believing in yourself and your vision. That's always a better bet than believing in someone else.

In any case, I've listed the things you can do with money from "worst thing you can do" to "best thing you can do." It is up to you what and how you'll follow the list above. It is also true that how often and how badly you've done them in the past will affect how well and how much of each of them you can do in the future.

Remember that you control your own financial destiny. What you've done to this point will only make it easier or harder for you to get to your desired situation. What you do from this point forward, though, is more important to reaching your goals.

The Requisite Dave Ramsey Post

August 23rd, 2012 at 09:17 pm

Most people who start looking in to personal finances fall into two categories:

1. Someone who realized the need without making mistakes.
2. Someone who realized the need after making mistakes.

Most of us fall into the second category. I know that I am one of the latter group. Someday I may post my personal story, but that's for a later day.

After making financial mistakes, most of us find ourselves deeply in debt. Now, the term "deeply" is a relative term. If you're making minimum wage and find your bills add up to 105% of your income, $1000 can look like an insurmountable debt. If you're making $100K per year but spending $105K per year, then maybe $50K isn't "too uncomfortable."

Regardless of your personal debt depth gauge, if you're looking at this site, at some point you found it necessary to do something about your finances. If you're like most people, you probably googled "get out of debt." Guess what (as of today) the first entry is? Dave Ramsey's site.

Now, I'm not going to try to sell you on Dave's methods. Dave does a good job of selling himself, because that's how he makes his living. And he's doing a fine job of both the selling and the living. I find no fault with that.

This post is written because there are a lot of Anti-Dave snobs out there. For some reason, a lot of people like to tell you everything wrong about Dave's plan. I'm going to tell you the best thing about Dave's plan: It works for everyone who actually uses it.

Dave has a seven-step plan to get out of debt. He calls his steps "baby steps," because each step is a small thing in itself. I think some of the baby steps are fairly large and shouldn't be called baby steps, but that's neither here nor there.

Dave's Plan, Baby Step 1: Emergency fund
His first step is to set up a $1000.00 emergency fund. Now, the wisdom of setting up an emergency fund cannot be argued. Having nothing as a financial shock absorber merely guarantees you're going to have a very uncomfortable time when life's bumps and pitfalls come your way (or you go theirs).

Here's my first problem with Dave's plan. I'm an engineer. Think "Dilbert on brain steroids." Engineers do one thing: Make decisions to solve problems. Maybe that's two things, but you get my point. I approach debt as a problem to be solved.

The first thing you do to solve a problem is to determine what is causing the problem. Dave omits this basic step. Are you in debt because you spend too much on electronics, because your child needed hundreds of thousands of dollars in medical payments, because you were uninsured and had a fire that destroyed your brand new house, car, boat, and ATV?

Each of the above possibilities has a different solution. Yet Dave would tell each of them: "First save $1000 in an emergency fund."

I have a different first step: Figure out why you are in debt. You do this by writing down where and how much money you have coming in, and you write down where and how much money you have going out. You can call this a budget, or you can call it a financial health check, or you can call it a worksheet.

In any case, you need to figure out the problem before you start to solve it, and Dave does have you do this as part of his plan if you purchase his plan, but he doesn't call it a baby step, and I believe he should.

Now, his Emergency Fund (EF) of $1000 is rationalized by him as "enough for emergencies" but small enough to keep you motivated to pay down your other debts more quickly. I would be petrified to have only $1000 as a buffer. I've had car failures of nearly $3000. According to Dave's method, I would then have to either use a credit card, take out a short term loan, or do without my car. None of those are good options, in my opinion. Remember, Dave wants you to put ALL money above the EF into loan/debt payments.

So, for me, I would need at least $5000 for an emergency fund, even at this stage. I don't need any external or false pressure to pay down debt. If I'm motivated to do something, then I'll do it.

My point is that this "one size" fits all doesn't really fit all. Now, the universal truism you get from this first baby step is that you should have some cash-on-hand in case you need it. How much is debatable, but the fact you need something available for outside-the-budget required expenditures is not debatable.

Step 2: Pay off all debt using the Debt Snowball
The debt snowball is not Dave Ramsey's creation. Almost everyone uses some form of it once they realize they are carrying too much debt and need to reduce it quickly. Dave has made it popular, and may even have coined the term "debt snowball," though I doubt he did.

I think this might be better described as a "debt payment snowball." It is a method of using the monies that were used for a retired debt to pay on the next debt-to-be-paid. Therefore, if you're paying $150 per month for a bill, and you pay off that bill, then you have $150 more to pay off the next bill.

Now, Dave suggests you pay off the bill with the smallest balance first, then go on to the next bill in ascending order. This is the first place that many people have a significant problem with Dave Ramsey's plan; mathematically, the debt with the highest interest rate should be paid first.

Now, no one can argue with that last statement, because I specified that it is a mathematical calculation, and it is true. The largest interest rate should be paid first mathematically.

Dave's plan trumps math at this point. In his own defense, Dave states that you need to get some victories early to really adopt the plan. The easiest and fastest way to get a victory is to pay off the smallest loan, regardless of its rate.

Why can I say you should do it? Well, "because it works" is the best argument, and the best basis for that statement is this recent study Kellogg Debt Payoff Study

The study above really isn't the whole story. I will say that once you have made the lifestyle change that this whole project really requires, you can change to the "highest interest rate" first method. Once you actually are dedicated to removing debt, and you have developed the discipline to do it, you should go back to Math and use it to your advantage. The real caveat here is that if you were doing what was mathematically correct, you probably wouldn't be in debt to begin with.

The method I used was "neither of the two above." I have to travel for a living. I have been to 71 different countries as of this writing. There is absolutely no way I could do this without a credit card or charge card. I have brought home expense reports of over $30,000 for one month. Try living in Singapore or Tokyo for a month - as well as pay for the plane ticket - on less than $15,000. Let me know how you fare.

I couldn't do one of Dave's other "truisms:" Cut up your credit cards. That just isn't going to happen. I could easily get 150,000 reward points from Amex every year if I were still on the heavy travel schedule.

Because I could not easily cut up my credit cards when I didn't have the cash to finance my travel, I set up my bills by "loans and lines of credit" followed by "credit cards." Even though most of my debt was business-related, it is just too easy to buy souvenirs and other fluff on credit when you're so used to using the cards. This was a discipline problem, not a financial problem. The financial problem was the symptom. My reasoning was that once the loan was paid off, it was gone. I then snowballed that payment into the next loan.

Of course, I paid the penalty of still spending a bit more on credit than I should have but after a few months, I stopped doing the credit card dance (spend too much, pay some off, leave some debt, cha-cha-cha), and started to put all the excess cash into paying off the loans and LOC's. The point is that I paid off debt in my way, not Dave's but the goal was the same: Pay off all debt.

Step 3: Save up 3 to 6 month's bills in an EF
Once again, I believe this is a good idea, but I question both its timing and its universality. I've already outlined why I believe the fund should be set up as Step 1 (after the budget, but that dead horse has already been beaten).

My second problem with this step is that everyone has unique circumstances. Let's look at my present situation. I work overseas for tax purposes. My job pays for my house, my car, my maintenance, my furnishings... everything except food and entertainment. So, my 1 month expenses that must be paid is about $400, unless I go out more than necessary. The food over here is expensive. According to Dave, I need less than $3000 in the bank for six months.

It will cost me about $4000 to ship my two dogs back to the US when I leave. I need to keep that money in the bank. So, my emergency fund should be at least $15000, for return travel and homestead set up upon my travel back to the US.

So, I modified Dave's plan to be "$5000, plus travel expenses" as my emergency fund. I do agree with his basic premise, once again: Save up enough so that if everything crashes in your life, you can ride through it for at least 6 months without panicking.

Step 4: Invest 15% of your income in your retirement fund
Once again, I don't disagree with the step itself, but I do disagree with the timing and the static amount. If you're 28, then 15% is a great amount to save toward retirement. If you're 58, you probably need to be doing a bit more than that to have any chance of retiring at all.

Secondly, I think the debt snowball should be modified. One warning, though, is that you MUST be committed to reducing your debt to follow my method instead of Dave's method. I will state that mathematically, Dave's method in this case is probably better than mine.

I think you should take at least 20% of your "snowball increase money" after paying off a bill, and put that toward increasing your EF and then toward retirement. In other words, using my $150 example from above, I would suggest you put $30 of that toward your savings or retirement, and the other $120 toward your bills.

My reasoning is that the markets fluctuate. You need to be buying continually to get the smoothest outcome. The old term for this is "dollar cost averaging," and its basic premise is valid: Investing a large amount at one time has the possibility that you have invested at a peak, and you can lose much of your value overnight. If you instead break up the large amount into smaller amounts and invest them over time, then any peaks or valleys are smoothed over. So, the longer you spread out your investments, the greater the likelihood that you won't lose significantly in one crash or downturn. Also, during the downturn, you're buying more shares rather than earning more income.

Again, Dave and I are not in disagreement, but his method does pay off bills more quickly. Also, since many employers offer 401K plans, you lose out on the "free money" of their match if you don't contribute, so using part of your money toward getting the match, which is typically at least 50% of your deposit, is only good financial sense. Dave's plan does not allow even this smart investment strategy until debts are paid off.

Step 5: Save for Children's College
I don't see this as a separate savings at this point. Rather than this title, I would say, "Max out tax-deferred savings, then save the remainder to taxable and therefore more liquid savings." This then allows you to pay for college, cars, or toys, at your discretion.

Why does one earmark his savings for future expenses? I can see the wisdom of making room for this, but by the time you get to this point, you should be able to save at least 30% of your income in some vehicle or another. If you haven't made the lifestyle change, then you're not even going to get to this point. By the time you're to this baby step, you should already have more money than you can spend wisely - and you should have developed the wisdom to know what "wisely" means. If you're still borrowing $50K to buy a $60K BMW, then you never got this far.

Step 6: Pay off your house
This one is a hard one. If you are close to retirement, then I agree with this wholeheartedly. If you are far from retirement, then this may not make financial sense for a different reason.

Once again, I agree with Dave in general. I think everyone should pay off his primary residence in full. I am now going to go into the reasons why you may not want to do so personally.

Right now, you can get a 15-year house loan for right around 3%. Historically, index funds have returned more than 10% over any significant period of time. So, you can reasonably expect to be paying 3% interest while earning 10% interest.

The simplistic reasoning above is correct in itself. Where it fails is that there are a lot more payments you make on your house that are not the loan amount. You pay taxes, insurance, maintenance, and improvements in addition to the payment. Will you still make money buying a house on credit? You most definitely will unless you buy stupidly. Who bought stupidly? About 90% of the people who bought a house from 1998 until 2007. OK... the 90% figure is fictional, but the trend is not.

Real estate was booming in the timeframe I mentioned. This chart shows that from about 1997 until 2007, housing prices were literally skyrocketing. Why was this? Because everyone who played this game was greedy and figured, "I can buy this $100,000 house for $150,000, then sell it a year later for $200,000 and use that $50K for toys." And that's what most people did. People are not underwater on their loans, they are watching their loans on big screen TV's and riding to work in their loans inside Mercedes SL cars.

The money was borrowed and wasted. This is the reap what you sow part of life.

Regardless of the pontificating above, housing prices are now at a decent level, but loan money is cheap. I suggest that if you're young you may want to use a house loan to increase your income. My personal opinion is that you should pay off your principal residence, and use your "extra money" to purchase real estate for rental or investment purposes.

I just don't think I should use a necessity as collateral for investments. I see it as only a small step above using your house title as your bet on one roll of the dice in Vegas. It's still gambling with your house, no matter how you rationalize it. Sure, the odds are better with an index fund than with the roll of the dice, but the payoff with the dice is quicker and more definite - both of these statements are predicated with "if you win." Both of them can be lost.

Step 7: Build Wealth and Give
No argument at all at this point. How you build wealth here is up to you.