Setting Up an Emergency Fund

Every home should make a budget and every budget should include an emergency fund. As a general rule a budget starts with the following essential categories (in roughly this order):

Food
Shelter (rent or mortgage)
Utilities (power, water and garbage only)
Clothing
Transportation
Emergency Fund

Note, high speed internet is not a utility. Cable tv is not a utility. While I agee both are very important to any home, the basics are critical. Can you eat and stay out of the cold when its freezing? The emergency fund is needed as insurance so those needs can always be met.

After budgeting your estimated essentials for the month, next budget a set amount every month to go into your emergency fund. A fully funded emergency fund for a typical home should be between $1,000 to $2,000. If you rent, $1,000 might do just fine. If you own a home, $2,000 might be more realistic. This is because a major house emergency like heating going out in the winter will likely be covered by your landlord if you rent but could cost you thousands if you have to replace your home HVAC system. $1,000 also is a good chunk of any major car repair. It wont necessarilly be enough to cover ALL of you unexpected expense but hopefully enough of it so you can manage with a few tight months to pull out of it.

How much money you put aside each month for the emergency fund is up to you but I recommend no less than $100 a month as that would take you a full year to build up $1,200.

Bills, entertainment, and everything else come after you budget for your essentials. While it is never good to avoid paying a bill, that emergency fund is as important as paying the rent. If you cant afford to pay the rent, feed yourself, keep the lights on, and plan for emergencies, you definately cant afford to pay on a credit card or go out to the movies.

Use the emergency fund only for essential emergencies (i.e. to fix a leaking toilet, fix the hvac system, or fix the car’s transmission.). For other home repairs that are not emergencies, we will build another fund for that after the emergency fund is fully funded.

Make Sure Your Children Know How to USE Technology

A recent AP News story suggests that kids have it too easy nowadays when it comes to doing homework due to the enormous number of online tools available.  While this article makes it sound like this is a BAD thing, the fact is, kids today are GOING to use these tools.  I suggest that rather than hindering your children and making them do it the “old fashioned” way, you learn how to do it the faster and more efficient way and teach them to do the same.

Another sign teens have it too easy   BETH J. HARPAZ

ASSOCIATED PRESS      NEW YORK — Here’s yet another sign that today’s kids have it way too easy: They no longer have to learn the format for creating bibliographies for their term papers.

They just log on to  EasyBib.com  , fill in the blanks (title, author, publisher, etc.), and voila — instant bibliography, in alphabetical order! If you have the ISBN number, just type that in, and the program will even fill in all the blanks for you.

And that’s just one example of how modern technology and the internet have made my kid’s academic life so much easier than mine. When I was in high school, and even in college, getting all those term papers finished in the weeks before   Christmas break was horrible.

Who could enjoy the holiday season amid endless trips to the library and looking things up in the encyclopedia? Term papers on events that you had to research using newspaper articles were even worse than ancient history, because you had to figure out how to use the dreaded, creaky microfilm machine.

Now if a kid needs a newspaper article, chances are it’s right online.

Typewriters were awful too. You’d get Wite-Out to fix all the mistakes you’d made, but it was either too runny or too thick. You’d blow on it till it dried, but the inked-in corrections always looked terrible.

Today kids just spell-check everything before printing out, and if they still can’t get it right, then I say they don’t deserve an A.

I can’t say that Wikipedia has replaced encyclopedias, since some teachers don’t permit it as a source, but certainly if you need to know what the Monroe Doctrine is, or the year of the Boston Tea Party, Google will provide the answer faster than a book. Not that the internet can replace books for research altogether, but for fact-checks, it’s awfully efficient.

Another crutch for the young 21st-century scholar is the ability to search for tiny details in a digitized text and get instantaneous results. Why bother taking notes, highlighting or using Post-Its to keep track of a character or motif? If the book or document you’re writing about can be accessed in a digital format, all the references can be located electronically.        Let’s say a kid was supposed to read The Catcher in the Rye. And undoubtedly, he did read it … or most of it … but maybe he didn’t take notes, or maybe he just wasn’t paying close attention. And now all of a sudden the teacher is demanding an essay on Holden Caulfield’s famous red hunting hat.

What, you don’t know the meaning of that hat? That’s an important symbol! You better Google that!

You’ll also need to read some of the passages where the hat is mentioned. But you don’t have to thumb through every page in the actual book, skimming for the word “hat.” Just go to  Amazon.com  , find the book, click on the “Look Inside” offer, and type “hat” into the “Search Inside This Book” box.

References containing the word “hat” line up on the lefthand side of the screen. If you want to see them in context, just click “Next Result” on the righthand side, and you’ll see the whole page.

Obviously this won’t work for every book. Many texts, especially newer books, cannot be accessed online. But a lot of the texts that high school students use — Shakespeare, the Iliad, classic poems, noteworthy speeches — are available in their entirety, if not in Amazon, then in Google Books or some other database. You might not want to read a whole book or a play sitting at a computer, but finding a quote that you halfremember in order to use it in a term paper is much easier with a digital find command.

As someone who grew up without all these electronic shortcuts, I have mixed feelings about them. It’s not just that I think my children should suffer the way I did — though certainly that’s part of it. I never miss a chance to start a conversation with the words, “When I was a kid …” just to drive them crazy.

But I honestly think they’re missing out if they never have to physically skim through a   book looking for a quote or reference. So many times I’ve gone looking for some little phrase in a text and ended up reconnecting with the story all over again. I might start rereading a favorite chapter or critical passage, or even get distracted from my original search because I stumbled on some new theme or point I hadn’t considered before. And for me, that’s half the fun. I don’t think kids growing up today are missing anything by using  EasyBib.com   instead of memorizing the format for a bibliography, but it would be too bad if digitized texts meant they’d never get lost in a book again.

Still, for high-school research purposes, it’s clear that the Internet has largely replaced a physical library. So imagine how thrilled I was the other day when my son told me he’d gone to our neighborhood library to pick something up for a social studies paper that’s due before Christmas break.

I guess it shouldn’t have surprised me when the item turned out to be a movie.  

Use iPhone to Save Money – AP News story

This blogger seriously believes in the cost benefits of owning an iPhone even with ATT and Apples stranglehold monopoly on pricing.  The following news story from the Associated Press gives you just a glimmer of the iPhone’s ability to save you money.  I’ll be posting much more about the apps and application of those apps in the “real world.”

Shoppers with smart phones find the deals   ASSOCIATED PRESS      MILWAUKEE — The rise of smart phones, with their goanywhere internet access, is changing the shopping game this holiday season.

Tech-savvy shoppers are finding it easier than ever to work the system to get the best deals.

They’re scanning barcodes with their cell phone cameras to load into price comparison Internet sites while standing in store aisles, using GPS to find discounts at nearby stores and flashing electronic coupons straight from their phones.

The ease of real-time price   comparisons creates competitive pressure for retailers that pushes prices down for everyone. Retailers who resist risk losing a sale to a rival even while the customer still is in their own store.

Briana Carter, 31, recently spied a $40 pink laptop cooling pad at a Kohl’s department store. She scanned its bar code with her iPhone and using an application called ShopSavvy found the same thing for $25 at online retailer  Amazon.com  .

While still inside Kohl’s, Carter, of Tipton, Ind., bought the pad from Amazon through her phone.

Shoppers definitely have discounts on the brain. Unique visits to the top 10 coupon and rewards sites rose 6 percent from October to November to 70.4 million, Nielsen Co. research said.

Merchants, already struggling with weak sales and a mediocre holiday season in this tough economy, are forced to play along, said David Bassuk, a managing director in the retail practice at consultancy AlixPartners.

A few years ago, www.  savings.com   listed coupons for about 1,000 retailers; that’s up to 4,000 now.

Sales to people who click   through the  savings.com   site are expected to double to $200 million this year from last.

“Would they rather have every consumer come directly to them and pay full price? Of course, but the reality is it doesn’t happen that way,” said  savings.com   CEO Loren Bendele.

About 18 percent of cell phones are smart phones; they’re on track to be the majority in the U.S. by 2011, Nielsen says.

Waiting for them are hundreds of applications made by third-party companies to root out discounts and coupons. Many of the apps are free.

Dave Ramsey vs Clark Howard

A fair number of financial related posts on this site will come from the advice given by these two financial giants. Both of them have nationally syndicated radio programs. Both of them have downloadable podcasts. And, both of them have a metric f-ton of listeners tuning in every day to hear their advice. Unfortunately, both of them have quite different philosophies and advice.  So which of them is better or worse, and why? I will review the pros and cons of both in this breakdown.

PHILOSOPHICAL DIFFERENCES

Dave Ramsey touts his financial system as a “Bible-based” system and as such he believes the Biblical model is to owe no man anything (despite the fact that the Bible has lots of rules on lending and borrowing).  In other words, Dave Ramsey preaches that you should ALWAYS pay for things in cash and if you don’t have the cash, you can’t afford it, PERIOD! In general I find this a very sound principal and for that I still like listening to Dave’s show.

Because Dave does not believe in debt, you would never ask Dave for advice on how to raise your credit score (because a credit score is only good for borrowing money) or how to consolodate debt into a lower interest rate loan or get a lower interest rate on your car or home loan. Dave is 100% about becoming debt free and I will admit, that would be an amazing feeling, so again, Dave’s show appeals to me.

Unfortunately, Dave’s advice for almost all difficult financial situations is “get a second job.” If you already have two jobs his advice is similar, “get a third job.”  Oh, and also you should eat only two things until you are out of debt, “Rice and beans and beans and rice.”.

Another annoying trait is that Dave views most Americans as lazy and a bunch of whiners (he says it all the time). Dave’s advice is tough love advice, “Get another job, eat beans and rice, and quit you whining until you get out of debt and can afford fun things again.”

On the opposite side of the coin, Clark Howard believes in the credit score and tells you how to improve it so you qualify for better rates and better deals. In some cases Clark even ENCOURAGES the use of credit cards (but in a fiscally responsible manner).  Clark has a serious problem with debit cards however, which he calls “piece of trash, fake Visa and fake Mastercards” which he says does not offer the same protection and benefits of real credit cards.

Dave Ramsey’s focus is on getting you OUT of debt and his mantra is that “the paid-off home mortgage has replaced the BMW as the status symbol of choice.” Clark Howard’s focus is on using credit wisely and helping you “save more, spend less, and avoid getting ripped off.”  While Dave would ask that you have ZERO debt (with the possible exception of your mortgage), Clark would recommend that you have no more than 25% of your credit limit used at all times to maximize your credit score.

On a typical Dave show you will hear how to make and stick to a budget and what to do with large windfalls (i.e. Do you pay off your house or invest in your kids college fund?). Callers mostly call in to brag about becoming debt free using Dave’s techniques or to ask why his system isnt working for them (which the answer usually is that they haven’t gotten a second or third job yet or started eating rice and beans). On a typical Clark show you will hear how big banks and cell phone companies are ripping off Americans for billions of their hard earned cash and what you can do to avoid playing into their traps.  You will also hear safe ways to invest your money and pay for our children’s education.

DEMEANOR AND DELIVERY

As different as their philosophies are, so are their demeanors.

Dave is a southern gentleman with a deep southern drawl and a steady, deliberate cadence. Every woman he adresses as “darlin’ ” and with men he just gets down to “brass tacks.” Dave sounds gentle (when he’s not telling you to stop you whining) and when he insults you he does it with a chuckle so you feel like he is just giving you friendly advice (being tough, but not too tough). Personally, I find his tone extremely condescending and he comes off entirely arrogant. If you dont get that impression from him then you will get a lot more out of his program.

Dave’s target audience is church folk and you can tell he makes big money selling his program (which he calls Financial Peace University) to local churches that either buy his video series or hire him for live events. You can tell Dave is a salesman and he uses his radio show to sell you more of his products and enroll you in his many courses to teach you how to handle your money. When he gives away one of his books, it’s because the book is a vehicle for promoting how you really should sign up for his classes.  Even his marital advice for new couples is to sign up together for his financial courses.  Everything with Dave is about buying his programs, books, seminars, courses, etc.

Perhaps the most annoying thing about Dave is his consistantly unchanging (and phoney sounding) response to “how are you doing?” Dave ALWAYS responds with, “Man, I’m better than I deserve.” After hearing that a few hundred times it loses some of the cuteness – trust me! What’s worse is his callers who feel compelled to respond with the same exact phrase when he asks them. I almost can’t listen any more due to this one issue alone.

Clark on the other hand sounds a little like he’s been sucking helium for a while.  He is almost “cute and cuddly” in his demeanor and sounds like he wants to be everyone’s best friend.  While Clark does have books and gives speeches for money, Clark rarely “advertises” himself and when he does, you can feel that he is genuinely uncomfortable doing it.  Clark’s annoying tag line to callers is “how can I be of service to you today?” and while it is said far too often, it still doesn’t grate on my nerves yet like “Man, I’m better than I deserve.”  Clark seems to genuinely view his show as a service (not as a promotional vehicle) and for that it makes listening to his show more enjoyable.

THE BEST CHOICE

The best choice for you might depend on your financial situation and focus.

If you are deep in debt and stressed out about all the bill collectors calling you, Dave’s show is probably right for you.  Dave reminds you daily of how good it will feel to finally be debt free and never have those annoying calls ever again.  It can be truly inspiring.  Listening to testimonials of others who have climbed out of debt and experienced the joy of being debt free can also be very inspiring.

If you are doing “ok” financially but would like to save more and find ways to make your dollar go even further, than Clark is probably right for you.  He is more entertaining to listen to and has way less of an ego.

Personally, I listen to both of them. I download Clark Howard’s radio show and listen to it on the way to work and sometimes at work on my iphone.  Dave I listen to on the way home because he is on live during my evening commute.  I have learned things from BOTH of them and while I prefer Clark, they both have things to offer. This blog will feature some of  my favorite tips I pick up from listening to both of their shows.