Dave Ramsey Classes for High School Students

In my opinion, this country needs to educate people on the basics of handling money. We know that our federal government sets a poor example on how to do that. Imagine if the average person had $1 million dollars in credit card debt, and acted like it was no big deal, and kept on spending. That is what our politicians do with our money. Financial expert Dave Ramsey know makes it possible for high schools to teach his class to teenagers. This should be a required curriculum in every high school in America. Teach the kids financial responsibility early. Then, they will avoid the pitfalls of credit card debt and making poor decisions. College students are often bombarded with credit card offers from all directions. People who are taught about money early will learn the importance of saving for retirement. Imagine if everyone in America started investing during their teenage years. Retiring at age 65, or for many people earlier, would be no problem. Find out more about the curriculum here: http://www.daveramsey.com/school/foundations/

An Emergency Fund will Help You be Ready for a Rainy Day

As a kid, many of us had parents who would recommend saving for a rainy day. That is good advice since rainy days will come and we don't know when. Financially speaking, every day is not sunny, where we have plenty of money to pay our bills and have money left over. In this economy, no one has a job that is rock solid secure. What do you do if your car breaks down and you need $750 to pay for repairs? If you don't have an emergency fund, many would pay for these repairs with a credit card. The problem with that is the interest charged by credit card companies, which can be as high as 25%. If an emergency fund is available, money can be used from that fund and you are charged zero interest. Therefore, the money needs to be liquid, meaning that we can have easy access to it with no penalties for withdrawals. Money that is tied up in stocks or a 401k or a certificate of deposit is not liquid. Cash in a safe or in a savings account is liquid. Emergency funds should be only used in emergencies, such as paying for medical bills, household repairs or car repairs. An emergency fund should not be used for a shopping spree at the mall or to pay for a vacation. Dave Ramsey recommends that $1000 is a good starting point for building an emergency fund. Over time it should grow bigger and bigger. Suze Orman recommends an emergency fund that is equal to eight months of a household's income. Emergency funds are important for households as well as businesses. I have heard about businesses that go under due to having a couple of months where the cash flow was less than normal. Businesses or households need to save when times are good, so that when money is tight, they have a reserve of cash. The key to financial fitness is being aware of the big picture, not just looking at making it day by day. Those who thrive are the ones who plan for the future. For example, contributing to a 401k with an employer match starting at age 25 versus age 35 can make a significant difference.

The Perils of Credit Card Debt

Dave Ramsey wrote an article about credit card debt, and how the interest paid on these can be so high. In his example, the monthly interest payments added up to $306. The thing that people do not think about is the fact that money spent to cover that interest cannot be spent on anything else. Your debts hold you prisoner until they are paid off. If the $306 monthly was invested in a growth mutual fund over the period of 35 years, you would end up with $1,967,873! That is why Ramsey is so opposed to debt. It robs you of chances to build wealth. Money not spent to cover credit card debt, car payments, student loan payments, medical debts, and the like can be invested, securing your retirement nest egg. Plus, who says you need to retire at 65? Smart choices can move up that retirement date to 60 or 55, or even earlier, with the right decisions. Each Friday on Ramsey's radio show, he has people call and declare they are debt free. They tell him how much debt they had and how long it took them to pay it off. For the whole article on the credit card debt issue, check this out:

https://www.mytotalmoneymakeover.com/article/how-credit-card-debt-adds-up?ectid=bitlyified010420120952

"Total Money Makeover" by Dave Ramsey

One of the best books I have ever read is "The Total Money Makeover" by radio host/author/financial guru Dave Ramsey. The guidelines he lays out are simple to figure out, but challenging to do. This is not a "get rich quick" book you see advertised at 3 am in a 30 minute infomercial. You do not need to be a CPA or an MBA to understand his tips on how to manage your personal finances more effectively. His credo is "Live like no one else, so that later you can live like no one else." This means that good decision making, and sacrifices made before retirement can lead to a retirement where you can thrive financially. His main piece of advice is to get rid of debt, whether it be an auto loan, student loans, credit card debt, medical bills, etc. Most need to borrow money for a mortgage, but he has stories in his book of some who made sacrifices to be able to pay for a house 100%. Certainly this is the rare exception, but some have done it. The main thing standing in the way of building wealth is debt. The average car payment in America is $378 per month. If this money was invested in a growth mutual fund earning 12%, which is the average return for long term investing over the history of the stock market, from age 25 to age 65, at retirement you would have over $4 million dollars! Dave says to pay off debt, starting with the smallest to the largest, then work on building an emergency fund. The starting goal for an emergency fund is $1,000. The ultimate goal for an emergency fund is to have it equal to 3 to 6 months of living expenses. That way if the car needs $500 worth of repairs or the furnace goes out and it is $400 to fix it, that can be paid from the emergency fund rather than on a credit card so that it can be paid in one lump sum with no interest. The emergency fund can be used for living expenses in case of a job loss, or for medical bills that come up, and the like. The emergency fund should be liquid, meaning it is easy to access without paying penalties. Those who are debt free with an adequate emergency fund can allocate more money to retirement investing than those who do not. In a nutshell, here are some tips from his book;

Stay away from rent to own places, it is not a good use of your money. You will pay $1000 for a $300 TV by the time you make the payments to own it.

Payday lending businesses are another bad use of your money. Their interest rates are incredibly high.

Do not buy a new car, the depreciation is too quick to be worth it.

Do not lease a car, buy one instead.

Go with term life insurance, the investment component in whole life is not worth it. It gets eaten up by fees and it is better to invest your money elsewhere.

Do not play the lottery, your chances of winning are miniscule.

Do not buy a trailer home. They do not last as long and the depreciation is high.

Debt consolidation services are no way to re-organize your finances.

Do not pre-pay for a funeral or college expenses.

Do not take out a home equity loan.

Invest 15% of your gross income in a growth mutual fund.

A Roth IRA is a good investment since it will grow tax free.

He stresses that money will not buy happiness and that the love of money is the root of all evil. Many have money as their god. Having adequate money gives one peace of mind and he says that money is good for three things--investing, having fun, and giving away. He says that giving it away can be especially enjoyable. Dave Ramsey is a Christian, and he is the author of "Financial Peace University" which is used by many churches to teach their congregations about how to manage finances wisely. He knows what it is like to struggle. He made millions in real estate in his 20s, managed it unwisely, and ended up broke. Anyone who wants to learn about how to handle money effectively should check out the books by Dave Ramsey.