Roofing day is almost here. As we make our final preparations - meals, materials, tools, work assignments - I have to give a bit of pause. As I put my girls to bed tonight, we went through the usual routine including our bedtime prayer. During the prayer, I asked God to help us remember to count our many blessings. Sometimes, despite our failings, we forget how truly blessed we are.

As we approach this project, I see that our cup runneth over, in more ways than one.

1. Finances - You may have noticed that our 'Full Disclosure' progress bar for the roof fund has burst through the levees. Not only did we hit our goal, but we kept going. we knew that some materials would need to be purchased once we were through the tear-off. Fearing an under estimation, we kept going.
   
2. Skills - While I am far from an experienced roofer, we have a family friend who is. We've enlisted his help for the long weekend. While I'm leery of leaning on him too heavily, I've been told that once he starts shingling, to just stay out of his way - he is that fast.
3. Helping Hands - When planning meals, we realized what an out-pouring of support we had. 10-14 just doing the actual labor. We have others watching the kids, others preparing meals, other still offering to help as they hear about the project.
4. Time off - We scheduled these vacation days some time ago, hedging our bets that it would be a 'good time' for it. I always say, in terns of work, there's never a 'good time' to take vacation - there is always something going on. You just have to take it and not look back. This actually looks to be a 'good time', with a slight lul in projects and other efforts winding down, it's a great time when compared to the past two months of crazy work schedules.
5. Weather - I'm not going to worry about the weather. I'm not going to worry about the weather. I'm not going to worry about the weather. Seriously, Lord, it's in your hands.
   

Try this little exercise sometime. Tomorrow, next week... they don't have to be big things, in fact it's the little things sometimes that matter most.

Right now - count three blessings. What are they?

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"....Keeping the American dream from becoming a nightmare".

Now, Dave is all about you paying off your debt. He can't wait for you to be investing. But if you really want to see him get fired up, then watch this lesson on real estate. He's been in this business nearly all of his life. As you might expect, he has a lot to say in this lesson and way more than I could review here - How to sell, How to buy, What to buy, What not to buy, financing....

What I will do is focus on Baby Step 6 and why this is an awesome thing to do.

Baby Step 6 is: Pay off your home early.

If you are on this step, then congratulations - you've come a long way. I never imagined that this step would be or could be challenged. I mean really, why would you want a house payment???


But alas, there's always a few "sophisticates" out there with some fuzzy math.

Bogus excuse 1. With a low interest rate on my mortgage, I can invest that money instead of paying down my house and get better returns. Well not really. A good rate on a mortgage today is ~5%. Let's say you went nuts and invested those extra principal payments in good mutual funds and got something crazy like 12% returns. With the cost of your money at 5%, taxes and inflation clipping you at another 4-6%, that gives you weak at best returns of 3%. I'd rather continue to invest into my retirement as in Baby Step 4, pay off the house early, and then invest without the 5% handicap.

Bogus excuse 2. Paying off your house early means losing a big tax deduction. That's not a bad thing. Deductions are for money spent. Child care, charitable giving, mortgage interest all qualify for deductions on your taxable income. If you made $70,000 last year and payed $10,000 in mortgage interest, then the deduction means that you now pay taxes on $60k rather than $70k because of that $10k that you sent to the bank. That income would put you in the 25% tax bracket (assuming Married, filing jointly in 2009). The difference in taxes for having a mortgage vs. not is the difference between $70k of taxable income vs. $60k. 25% of the $10k difference is $2500. Meaning that you think it's better to pay $10,000 to a bank to keep from pay $2500 to the government. And people say Dave Ramsey can't do math!

Imagine you've gone through the Baby Steps - emergency funds, paid off all debt, invested for retirement and college, and now paid off the house. Wow. Imagine not owing anything to anyone. Imagine what you could do once your monthly expenses were little more than food, utilities and .... whatever.

What would you do?

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We have been making a lot of head way on our garden remodeling project and the planted beds are looking and tasting great! There was a lot on my dream plan and not a lot in my not so dreamy budget. Come take a look at the progress.

• A cute fence around the garden
  
• Deer proof flower/ herb border on the outside of the fence
• Raised beds w/ mulched walking paths
• Adding 4 chickens
• A half shed/ half chicken coop
• Chicken pen for the new hens
• A chicken moat around the garden just inside the cute fence

That was my final "dream" plan as of the beginning of April. It's now July and the paper plans are coming to life.


Project Updates:

• The raised beds with mulched walking paths was the first thing we did. We built 8 of the nine beds so far. The last one will be completed in the fall after the crops are harvested out of that area. The beds are 4 ft x 18 ft x 8 inches deep. We were able to fill the beds with open bag specials at local stores. Most bags didn't have anything missing out of them and we spent $1.50 per bag. Not a bad deal, but it does add up when you consider the shear amount that we needed.
• As you know, we do have the four chickens. We all love the hens and are enjoying them in the backyard at the moment. The coop is completed, but we have not built the pens in the garden area yet. Once we do that we will move them to the garden until then they will be enjoying free range of the backyard and the ravine.
  
• The cute fence I dream of should become a reality slowly over the next month. We have gathered beautiful cedar boards and treated 4x4's from Craig's List sources. We just need to get the long runners for between the posts and we will have all the material to build a beautiful picket fence.
  
• The chicken moat to go around the garden area was abandoned because of the cost.
  
• The deer proof flower/ herb border for the outside of the fence has not been started because the fence is not in place. I'm still planning on getting the plants for free or bartering for them. For plants that I can not obtain that way I will try to start from seed over this coming winter to help save money that way.

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This summer I feel like I have been neglecting our blog. The Mr. has been picking up the slack while I've been MIA. Thanks honey!

Our youngest daughter is just shy of 1 1/2 years old. When our oldest was this age I traveled for work and the Mr. was a part time stay at home dad while she at day care the other half of the time. Things just sort of flowed and I didn't have to worry about things. This time around I find myself clueless about our toddler's behavior. Her personality is very different from her sisters and it has been 5 years. So while I've been "quiet" online, I've been busy reading book I can get my hands on that deals specifically with this age.

So far the most helpful one is called Me, Myself and I- How Children Build Their Sense of Self by Kyle D. Pruett, M.D.. I'm still reading it but it has given me some great insight as to what is going on in her little brain and how I can change my parenting style so that we can have a peaceful home.

Until I finish my research on parenting a toddler you might notice a little less posting from me. But no fear, I'm still here doing what I've always done, just not blogging about it.

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Of the 13 weeks, this is the only one solely dedicated to your income. This is where we talk about careers, and the dreaded extra jobs. I thought that this would be a very interesting lesson, what with the state of the economy and the number of folks in the class facing a career crisis.


The part of this lesson that I liked best was about job hunting. And while I haven't really had the opportunity to use his method to a T, I have done some of these things pre-Dave, and can certainly vouch for their effectiveness.

I'll break these into 4 key points

1. Identify the target. Everyone should know by now how few job openings actually make it to a typical job posting. The Mrs. and I have had a total of 6 jobs in our professional careers - None of them were posted in the paper, on job hunting websites or otherwise. Stop waiting for a opportuinty to find you. Find careers and industries that interest you. Identify companies you would like to work for. Your new hobby / part-time job is to study them and prepare to bother them.
2. 3-2-1 Contact. Dave recommends approaching this like a new relationship with an individual. This makes a lot of sense as you are not contacting a company so much as you are interfacing with an individual at that company. Dave also suggests that you contact them 3 times in effort to gain their attention. First is an introduction letter, simply stating who you are, what your interest is with them, and to watch for your next correspondence. Second is your resume and cover letter, where you deliver the goods. When you send your credentials, they would ideally be tailored to that specific company and showing the information about you that is actually relevant to that company. Third is the most important - the follow up. That cover letter, btw, should state your specifically when you will be following up with them. The follow up is where most folks fall short and assume that they'll hear back. This is a great way to set yourself appart. That persistance will pay off.
3. Sell the product. Sell? Yes. And the product, btw, is you. Differentiate the product - show them why you are not just like the other 20 engineers they interviewed last month. Show them why you would be more of an asset to their company than all the other applicants. This is how companies sell products and this is how you should sell you. Be prompt, be confident, be respectiful. Read the Go-Getter by Peter B. Kyne. Dave recommends this book all the time and it's fabulous. Again - follow up. Better yet, set up a follow-up appointment - in person, by phone, whaterver. Twitter it for all I care, just make the appointment and then actually do it. Between the interview and the follow-up, send them a note thanking them for taking the time out of their undoubtedly bust schedule to meet with you, and how glad you were to meet them and learn more about their company. Which reminds me - remember when you did all that research into the company and the person you would be meeitng with? That should result in some questions for the interviewer(s).
   
4. For the record. Keep notes, make a spreadsheet, set alerts, whatever. Find 10 companies to contact this way. Find 4. Find 20. The point is, you will likely contact them at different times, send them different materials, and follow up at different times. How will you keep it all straight? As I was approaching graduation, I (the free-spirit) had a large spreadsheet on my wall next to my desk detailing all the pertinanet info for all of the companies I had targeted. Who, what, when, where, why and how. That spreadsheet made the whole thing possibe.
   

I won't pretend - this stuff is not easy to do unless you are naturally out-going. But that also means that most folks won't be doing these things. In today's economy, you've got to attack a job hunt like it is you job. Be great at your job.

What techniques have you successfully used in job hunting?

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The Mrs. has had her eye on a couch. It was at a furniture store that was going out of business. That was two months ago. As nice as it would be, it just hasn't been a priority and our money was needed elsewhere in the budget. We went by the other day to see what was left. To our surprise, the couch was still there. We chatted with the salesman a bit (a hired-gun liquidator), and acquired some very useful information.

1. He was a liquidator, not an employee of the store
2. They were accepting reasonable offers, but reasonable was not half the liquidation price
   
3. An item could easily be had for 20% below the liquidation price

So what did all this mean?


First, it meant that the item was in our price range. We'd looked at other sofas and knew what we were not ready to pay.

Second, as we soon learned, our intrepid salesman had no loyalty to the store, but rather wanted to move items no matter what.

Third, we had a well defined range for our offer - from what would offend them, to what would assure us the deal.

That was in the morning. We spent the rest of the day shopping, talking, and relaxing a bit. All the while, weighing this deal. Should we go back? After an early dinner, we decided we would do it if we could get a great deal. We put on the negotiating pants and walked down that path.

We went back in our pick-up and made a quick stop by the bank for a fat stack of cash. The Mrs. informed me that she had her plan, we just needed to set our range. The liquidation price was $1300. Our tips from that morning told us that they wouldn't take $650 or less, and that we could just show up and get it for $1040 (20% off). She was willing to go up to $900, though that seemed a bit much to me. I thought $750 was a good starting price - a great deal for us, but 'reasonable' enough in the owner's eyes to make the deal.

We met back with our salesman and discussed our offer. We told him that we could swing $750 for the couch and still have money for sales tax. He was glad to hear that, as folks typically forget about sales tax. Oh, and we have cash. "Great", he said. We knew this would be good motivation for him, as this deal is a lock - no declined credit cards, no bounced checks. He knew we were ready, and he took off to present the offer.

A few minutes later he came back with the counter offer from the owner. "I need $840 out of that piece.... but don't let them leave", came the reply. Then he admitted, "I also told her that you offered $700." This was interesting. He had under bit our low-ball offer. We didn't say a word and he was telling us how he was going to go back and tell her that he got an extra $50 out of us and that the deal would be done - for our original offer. Sure enough, a few minutes later, it was done.

This guy was good. While filling out the paper work, he offered a bit about how as a liquidator, he has to play both sides a bit. Which he did. He worked on us, and got us to make an offer. He then knew just how to play it with the owner to get the deal done. He doesn't care what it sells for, just so long as he gets his cut and it goes out the door.

It was an interesting experience.

Have you ever negotiated with a liquidator?

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Our first installment of PF BS was a little easier to sugar coat. This one, I'm pretty sure, is the ultimate cop out of personal finance. It usually comes up after a bit of debate between differing opinions. Or maybe a heated exchange. A crutch, a cop-out - call it what you want.

"I think you should just do what works for you"

• "Should I really pay off my 0% interest debt when I'm getting 4% on my money market?"
  
• "Credit cards aren't bad - I like mine and I think it likes me"
• "I think budgeting is a waste of time and cash is a pain to carry."

Sure, sure, "I think you should just do what works for you".

Or maybe not.

I'm callin' BS.


Again, caveat time: What does 'work' for you?

Just because you've never carried a balance on your sweet, sweet rewards credit card doesn't mean it's working for you. The Mrs. never carried a balance over 8 years - even during college. Still, once married, we were definitely overspending on it. Not to the point where we couldn't pay, but it was money we definitely didn't need to spend. Not workin'.

Borrowing to invest only seems like it's working when you don't understand what's going on. If that investment isn't returning 6% or more, it likely isn't covering taxes and inflation while returning an amount worth the hassle - not to mention covering the finance charges on the loan. If it's returning more than 6%, then it's likely risky enough that a large chunk of it may disappear on you and not be there to repay the loan when due. Not that the stock market or real estate ever takes a sharp nose dive....

So how do I know when something is working for me?

1. It has a positive affect on your net worth. Home equity loans, student loans, credit card debt, and whatever other 'good debt' you've talked yourself into all takes you in the opposite direction. Buying a brand new car vs. a slightly used one will at least make the purchase less of a hit. Saving money - for purchases, retirement, or college - take us to where we want to go.
   
2. It encourages good behavior / discourages bad behavior. Living in the moment, impulse shopping - bad. Having a handle on your spending, living on less than you make - good. It has been clinically proven that spending cash neurologically registers in the brain as pain. While spending on plastic does not. And those fancy new key fobs almost don't register at all.
   
3. You understand it. I mean really, really understand it. Unless you're ready every fine-print page of your card holder agreement and you understand it, then your credit card would not fall into this one. By the way, many lawyers have a difficult time deciphering all the legalese in card holder agreements. Also, judging by the fact that several comprehensive pieces of federal legislation are required to govern it, it's highly unlikely the the majority of cardholders understand what they have signed up for.

So before jumping head first into a financial decision, ask yourself:

1. How will this affect me in the long-run? How likely is this to work out in my favor?
   
2. What kind of behavior is this likely to encourage? Am I looking for an easy way out?
   
3. Do I fully understand the ups and downs of this? No, really, do I?
   

"It is the blessing of the Lord that makes rich, And He adds no sorrow to it."
-Proverbs 10:22

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What a week! Starting last Thursday we have had several bad storms come through our area of the country. Thanks to the strong winds and heavy rain we were without power for part of the time and were without internet from Thursday night until about an hour ago.

Thanks to a couple extra posts the Mr. had already written you didn't notice us missing... yet. Since we are now trying to play catch up we might be a little light on posting over the next 10 days or so. We just thought that it would be nice to give you a fair warning.

Also, I have not forgotten about the giveaway. I just emailed the winner and will hopefully hear back from her soon.

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Here at the NtJS ranch, it's no secret that the Mrs. handles the majority of our finances. She prepares the budget, handles most of the shopping, pays the bills, and generally keeps us heading in the right direction. Not that I'm not involved, but she is clearly the point person.

Recently, the Mrs. handed me a stack of papers. It was the latest statements for our investments. Through everything else she does, she just doesn't have the time to decode the statements, and keep on top of each account. This one she was going to defer to me.

That night, we reviewed each account and attempted to decipher each statement. And there is a lot to go through. We have my 401k, my SEP IRA (rolled from a previous job), my Roth IRA, her IRA, and 529s for both of the kids. While doing this, we made a shocking discovery that I'm still not sure if I should be happy or madder-than-smoke about.


The first pass I made in reviewing each statement was, "What is this invested in?". Which is exactly what I asked the Mrs. while reviewing her IRA statement. She wasn't sure as she had rolled her old 401k to the IRA and had told the custodian to transfer the money to the same funds.

Now to her credit, the Mrs. spent months getting this one sorted out. Our custodian's (former) assistant was dropping the ball big time, and not getting things done. In the end, we were happy just to have the money in the correct account! After that, we didn't pay much attention. Well, with that kerfuffle and the change in personnel, our request slipped though the cracks! Until last week when I asked the Mrs., "What is this invested in?".

The answer is: nothing.

For about 2 years, her IRA funds have sat 'unplugged' in a cash account. I still find it difficult to believe.

I'm mad about it because - this is a huge goof on the custodian's part. How could you let this slip and just not invest the money!?

I'm happy about it because - that sizable chunk of change missed out on that 40% hit that most funds took last year.

Since then, I've been scrambling to get on-line trading set up for the account and research mutual funds on the open market. Mutual funds are on sale right now, but many are rebounding so I don't want to waste time.

As for the other accounts, I have a handle on my 401k and am quite pleased with the funds I've selected there. The rest are invested, but appear to be in managed accounts that we don't control. That's about to change, but not until I get this IRA invested in something.

How do you manage your investments? Any tips for staying on top of all these accounts?

image from WST-Broker

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We're hitting the home stretch! Just three lessons to go after this. Arguably, these last 4 lessons are the heaviest. Not only due to the material, but also from the build-up of information of the previous 9 lessons.

Week 10 is the one that has a tendency to knock the wind out of folks. It's understandable - you're still in debt, just getting Baby Step 2 going, your budget is still frustrating you, and now you want to talk about investing!?! It's a daunting subject as-is.

Here was my advice to the folks freaking out after this lesson:


Absorb what you can now. Later when you approach Baby Step 4, you can listen to the lesson again, and spend more time on it.

It's a double-edged sword - It's tough to master all of this in 13 weeks, but it's great that Dave gets people thinking about this stuff even before it's time.

So let's go over the basics:

Baby Step 4 is: Invest 15% of you income in tax-favored plans

Tax-favored plans are ones that are qualified by the government, meaning there is a section in the tax code that outlines how these work. These are not accounts, but as Dave describes, these plans are the coats that keep the accounts 'warm'. These are arrangements that keep the IRS's greedy hands out of your money. For retirement, these include:

• Individual Retirement Arrangement (IRA) - Anyone with an earned income can use an IRA to save for retirement. There is a cap on the amount you can contribute, and there are thousands of funds to choose from on the open market. A traditional IRA is a pre-tax investment, meaning that the money is pulled from you paycheck before taxes are taken out. To that end, taxes will be charged at retirement when you take distribution of funds. A Roth IRA works a little different in that it uses after-tax dollars. Since you are taxed on the money now, your money grows in that account tax-free!
  
• Simplified Employee Pension Plan (SEPP) - This is one that you don't hear about very often. It is designed for people who are self-employed and allows them to invest a portion of their net profits. It too is capped, but the cap is much higher with a SEPP (2007 caps were $8k for IRAs vs $45k for SEPPs)
  
• 401(k), 403(b), 457 - These are employer-sponsored plans, meaning they are offered where you work. They usually include some type of match and/or contribution by the employer. Most employers will match your pre-tax contributions dollar-for-dollar up to 3%, though that amount can vary. The names of these plans simply denote the portion of the tax code that enables them - Section 403, sub-section (b).

You are not limited to any one, or one type of retirement accounts. I, for example, have a Roth IRA, a SEPP, and a 401(k). The SEPP was from a job where it was just the owner and myself. He was using a SEPP for himself and the easiest way he could offer retirement savings was to contribute to my SEPP. During that time, we also set up a Roth IRA as we were able to save more at that time. The 401(k) is from my current job.

Dave recommends.... taking part in your employer's plan up to the match, then contribute to a Roth IRA up to the cap. If you still have not hit the 15% mark, then go back and contribute more to your employer's plan.

One final note: when you leave a job, you need to roll the money from your retirement account to a new one. The rollover needs to be between like-accounts - pre-tax to pre-tax, after-tax to after-tax. You financial adviser can help you with this to make sure it happens right.

Baby Step 5 is: Save for your children's college using tax-favored plans
read more tags

Again, there are plans set forth by the government that allow tax-advantaged investment, this time for college savings.

• Education Savings Account (ESA) - These are also know as 'Education IRAs' as they act like a traditional IRA, but the money is for college expenses only.
• 529 plans - These are sponsored by individual states and are usually open to anyone, no matter where you live. For example, living in Texas, you can take part in the Pennsylvania 529 (assuming it suits you). What is difficult about these, is that they are all different. Some are excellent plans that allow you to control what you are invested in. Others automatically switch investments based on the child's age.
  

Also be careful as some of these 529 plans are in dire straits right now. Some of these plans have been so poorly managed or were poor investments to begin with that they are insolvent. Alabama's 529 program is $460 million short, and is currently closed to new investors.

Dave recommends.... to first use an ESA. They are the simplest and have fewer pifalls than 529s. Beyond that, you can look at 529s, but beware of those that are inflexable on the investmetns or use a 'pre-paid' tuition plan.

Does all of this make your head spin? Are you invested to the hilt? Where are you in investing?

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