READY – A New Goal

A New Goal

Image courtesy of renjith krishnan at

Image courtesy of renjith krishnan at

Goals are important; as anyone will tell you. And smart person will tell you that a goal has to be “S.M.A.R.T.” – Specific, Measurable, Achievable, Relevant, and Time-bound. Adhering to this prevents you from wasting time on pie-in-the-sky goals like “a billion dollars in my bank account by summer”. And so it is with this in mind that I announce my new goal:

“Turn my current residence into an investment property before December 31st, 2015”.


Is This Goal S.M.A.R.T.?

Specific – Well it doesn’t get much more specific than “my current residence”.
Measurable – Binary goals are easy that way. Either I’ve achieved it or I haven’t.
Achievable – Since I already own the home then I’d say this is very achievable.
Relevant – Becoming a real estate investor is highly relevant to my larger goal of quitting the Rat Race.
Time-bound – 12/31/15 is probably more time than I need, but a little padding doesn’t hurt either.


Where Will I Live?

Once I’ve got a tenant lined up I plan to move into a very small, very modest 1-bdrm apartment for a year or two and save money as aggressively as possible. I plan to be like many wise REIs and live in a less luxurious home than my tenants do!


Is This Really a Good Idea?

This move will not only allow me to earn a few hundred dollars per month for the rental of the property, but will allow me to save a few hundred more dollars in housing costs as well. This difference will, of course, be channeled into other investments. So, yes, this is a very good idea. But even without the rental income, a 1,500 sqft house is just too big for my modest needs. I would be much better served by housing that more fits my spartan lifestyle.


Am I Ready to be a Real Estate Investor?

I’ve read many, many, many real estate investment books during the years when I was still only focused on debt elimination; this wealth vehicle makes an intrinsic sort of sense to me. And while most of those books were probably published during the build up of the real estate bubble, I made it a point to look for books that were written by authors who were in the game for more than a couple decades. And among those I found one piece of advice that really spoke to me: “have 6-months of rent set aside before you go to rent a property”. To many of you that may seem excessive since vacancies typically run for only up to a couple months, but I am a cautious man when it comes to my money, and having a little extra buffer will allow me time to pick the best tenants.


What’s Next?

In order to get my home rent-ready I need to save up 6-months worth of mortgage payments plus do some cosmetic touch ups (new interior paint, carpeting, etc). All told I think I’ll need a little less than $10,000 for all of this. So that is my immediate, smaller goal: save $10,000. I’m sure you’ve noticed, there is a “thermometer” on the right. It will be updated monthly and show you the progress I’ve made in saving this sum. Once it is filled I’ll begin the cosmetic renovations and start searching for a highly qualified tenant.

I can’t begin to tell you guys how excited I am about becoming an real estate investor. This is a step I’ve literally been preparing for since I began my financial journey back in 2006 and to finally be this close to seeing it fulfilled has really got me charged up. I mean, sure I’ve established other  passive income streams, but with this I think I will finally feel like an actual player in this game, instead of just a spectator. Wish me luck.



See you at the top!

March 2015 Income Report

March 2015 Income Report

Image courtesy of renjith krishnan at

Image courtesy of renjith krishnan at

Now that we’ve cleared the March hurdle, let’s take a look at the numbers and see where we came in.

(Oh, but first, if you aren’t already familiar with my budget strategy, the 50/30/20 plan, then this post won’t make sense. So click the link and read the article to understand the beauty and simplicity of this budgeting master plan.)


March Budget

Here is what I planned:

Projected Income 100%
Essentials – 50%
Lifestyle – 30 %
Investing – 20%

And here is what I actually got:

Earned Income – 79%
Essentials – 118%
Lifestyle – 39%
Investing – 15%


Budget Analysis

Income – Poor job performance in February lead to the very small commission check I received at the beginning of March, hence my smaller than expected income.

Essentials – Yes, you read that right. I spent every penny I earned, and more, on just essentials this month. This had two causes, my cat grew sick and had to have emergency surgery to the tune of nearly $2000, and my grandmother died which left all of my family with several unexpected expenses in preparation for her burial.

Lifestyle – Lifestyle popped over budget by 9% due to my needing to pay to reserve my spot at an out of state event I’ll be attending in October.

Investing – Investing came in 5% lower than the requisite 20% because I am already extremely over budget this month. But among that 15% I still include my usual savings, such as future car replacement and brokerage investments.


March Side Hustle & Passive Cashflow –  $38.09 (interest only) –  $13.47 (interest only)

Dividend Stocks – $23.85


Cashflow Analysis

In March I spent a total of 168% of my income. And I have to tell you, it hurt. But were it not for the care I take with my finances then I am confident this month would have resulted in some heavy credit card use, and with that, stiff finance charges. Awful as this month was, it has reminded me of how important it is to have a finger on the pulse of my cashflow.


March Successes

  • Provided love and support for my mom while she dealt with the loss of her mother


March Failures

  • Spent more than I earned for the first time in decades.


Forward Planning

To make up for the vacation costs I’ll be diverting my usual vacation savings for a few months. I’ll also


See you at the top!

(And if you want to be able to analyze your own monthly expenses and income then subscribe to my email list at the top of the page and download a free copy of the 50/30/20 plan I’ve created for you.)

Getting Past the Gatekeeper

Getting Past the Gatekeeper

Getting Past the GatekeeperI have a confession: I….am a salesman. It’s true. I’ve been in some form of sales for basically whole life. Whether it was when I was a kid selling candy for a charity (a shady one, now that look back on it), selling candy for a quarter to my classmates, pushing kitchen knives door to door, or hawkin’ TV packages for the “Darth Vader” of cable companies I have been charged with the duty of selling for almost as long as I can remember.

This experience with professionals and the general public has taught me a few things, too. For example:

  • Give half a chance, an old person WILL tell you how old they are.
  • Universal suffrage was a bad idea.
  • Some gatekeepers get off on being dicks.

That last lesson is what brings us to the point of today’s article – gatekeepers.


What is a Gatekeeper

Remember that jerk who gave Dorthy a bunch of shit when she asked to get in and see the wizard? This guy.

That’s a gatekeeper. Simply put, a gatekeeper is a person who stands in your way to getting to the decision maker. For example, the secretary who tells you that the boss “is in a meeting”. That’s a salesman’s gatekeeper.


Why do Gatekeepers Suck?

I’m not in my job because I love the work or enjoy my colleagues company. I’m here because I want to make money. And gatekeepers stand in my way – it’s their job. Unless you’re actually doing business with the company, that secretary is going to actively discourage your success, often at her boss’s behest (and sometimes even after you’ve gotten the business, anyway!). And that makes them a salesman’s enemy. Now I know most sales books and “gurus” will tell try to talk to you like they’re Mr. Rogers and advise you to be all nice to them but I’m gonna tell you the truth: that’s a bunch of bullshit. Every shitty salesman that calls does the saccharin-sweet schtick, so your average gatekeeper is already jaded to that approach. So unless that gatekeeper used to be an extra on a kid show, then they’re likely too crabby to make friends with.

Worse yet, many, many, many of them will take their job frustrations out you. See, most secretaries and other gatekeepers are overworked and underpaid (or at least feel that they are). They have little autonomy over themselves and even less power over others. So when someone who gets stepped on gets the chance to step on someone else, many of them will take it. That means that, unless you possess techniques for getting past the gatekeeper, you are going to get squished.


Anti-Gatekeeper Techniques

I’ll begin by saying that while most sales skills are practically universal, techniques are often different. Not every technique will work in every environment. The kinds of tactics I would use in telesales (which I will describe below) may not be as effective in face-to-face sales.

Now, without further ado, here are some of my favorite Anti-Gatekeeper Techniques:

  1. ToneDrop that super-friendly crap. Unless you’re calling Big Bird and the gang from Sesame Street then you’re likely going to be dealing with a frustrated and jaded secretary of some variety. And that person isn’t going to relate to the chipper persona that your boss told you to use. Instead, try to match the gatekeeper’s level of energy. Does she sound bored? Annoyed? Or does she sound like shes on happy-pills, herself?
  2. NameYou need to know who you’re looking for. Not every calling list you’ll use gives you the name of the decision maker (many will give just a mid-level influencer), so you’ll have to find out. The trick I always used was to ask for their help, “Hi, my name is Brett and I’m kinda hopin’ you can point me in the right direction. I’m trying to find the office manager/sales vp/great and powerful Oz“. This sounds idiotically simple, but there is some serious psychology behind it (too much to get into right now). Suffice it to say I got a name more often than not. And even though I usually got the “he’s in a meeting” crap, I was in a stronger position the next time I called.
  3. Blend in or Stand out – Sometimes, if the “guard is asleep at her post” you want to try to slip by without waking her. Other times you gotta differentiate yourself from the horde of other callers. How you do this will depend on your office environment, personality, and what kind of sales you’re in. For me I usually had a few stand-by phrases I could toss out: if, for example, the gatekeeper apologizes when she calls me “Brad” instead of “Brett” I would say something like, “It’s OK, I’ve been called worse“. This usually gets a chuckle and warms them up to me a little.
  4. Expectation – One of the most dreaded questions salesmen fear is “And what is this call in regards to?”. And the rookie salesman will just answer it, “I want to talk to your boss about his toner needs”. Rookie salesmen are hungry salesmen. Instead, try this: “Oh, tell him this is Brett with XYZ company, he’ll know what it’s about“. They will always at least check w/ the boss and see if he wants to talk to you. (Caveat – this only works if the boss really will know what you’re calling about, can guess what you want because he knows your company by name or gets emails from you/your company, etc. Don’t use it if the boss has no clue who you are or why you’re calling. Liars will never get put through.)
  5. AvoidanceAsk for his cell or extension, duh! Avoid the gatekeeper altogether by not dialing her number to begin with! And if the boss says he doesn’t have one then ask what’s the best way to get through the gatekeeper. And if you have set up a follow up call then ask him to tell his secretary to expect your call (see #4 above).


Hanging Up

So there you have it, five of my favorite techniques to help you in getting past the gatekeeper. Got your own favorites? Leave a comment at the bottom and tell me about it.



See you at the top!

February 2015 Income Report

 February 2015 Income Report

Image courtesy of renjith krishnan at

Image courtesy of renjith krishnan at

Another month in the bag. Another month closer to early retirement.Time now to look back and see how I did in staying on budget and investing my money wisely.

Before that, though, I’ll need to issue a correction and explain some of these numbers. See, I have a sales job that pays both a base salary plus a commission as well as performance bonuses. This means that my income can vary VERY widely from one month to next depending on whether I meet and exceeded quota. And while, for budgeting purposes, I have estimated my income based on my average monthly commissions plus salary, I’ll have some months that are fatter than others. In months like that it will artificially reduce my percentages. So this month I’m going to add an “Projected Income” and “Earned Income” to give context for any sharp increases or decreases.

(Oh, but first, if you aren’t already familiar with my budget strategy, the 50/30/20 plan, then this post won’t make sense. So click the link and read the article to understand the beauty and simplicity of this budgeting master plan.)

Let’s see how this month turned out versus my January report.


February Budget

Here is what I planned:

Projected Income 100%
Essentials – 50%
Lifestyle – 30 %
Investing – 20%

And here is what I actually got:

Earned Income – 149%
Essentials – 34%
Lifestyle – 12%
Investing – 22%

Budget Analysis

Income – February was generous, but that is only thanks to my hard work and skill on the job. In February I received my 4th Quarter bonus from last year in addition to my regular commission.

Essentials – This category’s spending was largely flat vs January except for the uptick in groceries. I have since come to accept that my previous monthly budget of $200 is simply unrealistic (while I don’t shop at expensive stores like Whole Foods, I don’t survive by ramen noodles either) and will increase that to $300 and see how that goes.

Lifestyle – As planned at the end of January, I have increased my Vacation Fund contributions (which may still be insufficient), so there was a planned increase in this category. And other than having to buy a new power supply for my computer, there were no unexpected blips in this category.

Investing – Now, following the “pay yourself first” rule I have auto-transfers set up at the beginning of each month to save what’s mine before anyone else gets a hand on my money. But never knowing what the next month’s commission is going to be I always have to adjust that figure so that it comes to at least 20% (without that adjustment I’d have only saved a paltry 13%!)

February Side Hustle & Passive Cashflow – $36.80 (interest only) –  $10.41 (interest only)

Dividend Stocks – $17.99


Cashflow Analysis

If you read January’s report it might look like my passive income has taken a big hit. But in fact when I examined my Prosper and LC statements it looks like only three loans were lost to collections in February. Not a big deal, though, since the profits generated in February allowed to LC purchase one loan and Prosper picked up eight of its own, more than offsetting the loss in the long term.
The decrease in dividends was huge, but this is due only to the dividend payment schedule. None of my dividend securities have reduced or eliminated their distributions.


February Successes

  • Per January’s analysis, I increased my automatic transfers into my Vacation Fund account. I also put that money into a “money market savings” which pays me something like 0.000000000001% interest (which is a lot higher than my former “regular savings” account that paid 0.000000000000001%). Woo hoo!
  • Due to my larger than normal commission check I was able to save an additional $713.
  • This month, passive income profits now accounts for 1.6% of my $4000/mo goal.


February Failures

  • Due to some unsatisfactorily-explained server issues (and then the loss of my PC’s power supply), I was unable to access this website for about 2 weeks causing a dramatic slowdown in my content production.
  • P2P profit is down by $4.67 this month vs. January.
  • Still in the Rat Race.


Forward Planning

You’ll notice that, according to the numbers above, I’ve still got 81% of February’s income sitting in my account. And while I can’t go into the details, suffice it to say that I’ve got most of that earmarked for some unavoidable non-RatRaceQuitter purposes. However, I’ll shortly be announcing a new goal and some large-scale future plans, so stay tuned.



See you at the top!

(And if you want to be able to analyze your own monthly expenses and income then subscribe to my email list at the top of the page and download a free copy of the 50/30/20 plan I’ve created for you.)

Should I Invest in Dividend Stocks?

Should I Invest in Dividend Stocks?

Aristocrats memeWhen I decided that retirement at 65 wasn’t for me it was only a matter of time before I started to take a good look at owning stocks.But not just any stocks would do, I needed stocks that pay me just to hold it. I needed dividend stocks.

And not just any dividend stocks will do, in order to hedge against inflation I needed strong reliable companies with an excellent history of constantly raising their dividend payout. The trick, of course, is picking the winning horse. But more on this later. First, let’s answer a basic question, up front: what is a dividend stock any why are they a key part of my investment strategy?


In a nutshell, when a company takes in revenue it can either decide to reinvest that capital into its operations or it can decide to pay a portion of that revenue out to its shareholders in the form of a monthly or quarterly dividend (well, it could also buy back shares, but that’s not important right now). There are several advantages afforded to investors by these kind of securities. Such as:

Steady passive income – You get paid just to own it. And many companies pride themselves on their dividend paying history. And a company that sees paying me as part of their company’s identity is A-OK in my book.

Increased value over time – Even taking into account depressions, recessions, and “price corrections”, the value of many of the large mature “blue chip” companies you find in the market have gone up, over the long term.

Advantaged Tax rate – Recognizing that this could change at any year, right now the tax rate (“Capital Gains” tax) applied to dividend income is only 15% – 20%, depending on your own tax bracket. This very fact allows me to keep more of my own money.

DRIPs – “Dividend Reinvestment Programs”. These allow you to automatically reinvest your dividend payment back into the company and buy more shares. You can even buy fractions of a share, which will pay an equivalent fraction of the dividend, allowing you to compound your returns even faster AND avoid paying broker trading fees.

Reduced risk – ….sort of. Most typically, the kinds of companies that not only pay a handsome dividend but also have a strong history of raising that dividend each year are large, solid, and mature companies that have weathered storms in the past and can do so in the future. Companies like these are usually on more financially solid ground than young companies.

“Low sophistication” investing – I am a “buy and hold” type of investor. This strategy doesn’t as much require me to understand the “butterfly effect” that seem to cause the daily fluctuations of the stock market, but rather to understand a company’s fundamentals and financials.


Of course, for every advantage in the stock market there seems to be an equal but opposite disadvantage. By valuing the characteristics above I am also, by necessity, accepting the disadvantages below:

Dividend reduction – A company that pays a dividend can decide to slash, or even eliminate, their dividend when they hit rough waters. And this can be done with little to no warning.

“Abandon ship” devaluation – Many dividend investors will dump a stock if the company reduces their dividend payment. And if a sufficient number of investors do this then it will cause the price of your stock to drop, even if the dividend reduction was necessary to the company’s long term health.

“Double” taxation – (Can’t remember where I stole this example from. Anyone got the link?) Imagine you’re a parent and you just got your paycheck, on which you of course paid taxes. Then you go home and give your kids their allowance on which they have to pay taxes too! That is what happens with a dividend. The company pays taxes on their revenue, and you pay taxes on your dividend income. Uncle Sam gets to double-dip on the same dollar.

False sense of security – Remember Enron? The despicable company that cooked its books to fool investors and went bankrupt in 2001? Yeah…they paid a dividend. While it is difficult to believe that a giant like Coke or Johnson & Johnson could suddenly implode for any reason, these things can happen. “Blue chip” is not synonymous with “bulletproof”.

High-yield trap – The inexperienced investor can often fall victim to absurdly high yields. We all want to get the highest yield possible, of course, but more important for long term investors is the question of how long the company can sustain their yield rate. A company with a dividend yield rate of 3% or 4% has a better chance of maintaining that rate for the long term than an equivalent company that is trying to attract investors by offering 8% or 10%.


“Don’t Lose Money”

Warren Buffett tells us that there are two rules of money: “Rule #1. Don’t lose money. Rule #2. See rule #1“. And on the surface that can seem frustratingly obvious, but when you dig just a bit deeper you realize that his remark is not just a wry comment, but also an admonition for responsible investing. Too many investors chase returns and throw their money in with a company or a mutual fund that seems to promise better than market average returns (we’ve all done it). And overwhelmingly these investors end up limping away to lick their wounds. And some investors, inexperienced ones, often never return; swearing that the entire game is just a crap shoot and you have to be a crook to make any money.

Years ago, having taken this one on the chin myself, I wanted to find a better way to invest in dividends. Then I stumbled upon a curious term, “Dividend Aristocrats“.


What is a Dividend Aristocrat?

Put succinctly, the dividend aristocrats is a list of companies who have increased their dividend every year for 25 or more consecutive years. These are often well known companies you know by name. Brands like Coca-Cola, AT&T, McDonald’s, Johnson and Johnson, and Chevron.

So what does all this mean in dollars? Well, if you hop over here you can run your own numbers, but say you had $10,000 and invested it in Johnson & Johnson on August 1st, 1995, reinvested the dividends, but didn’t add any new money to it. Well, by the end of 2014, you’d be sitting on a cool $91,347.53! An 813% total return! (And just for comparison, without reinvesting the dividends you’d only have $74,107.01; a 640% total return).

Another advantage these companies have is that they are easy to understand – even my six-year-old niece knows what McDonald’s sells – and it is often these companies who sell simple to understand products and services that can weather market storms; no matter how bad the economic weather gets, people are always going to buy soap, hamburgers, and the latest iPhone. And just as a general rule, if you don’t understand what a company does then you shouldn’t be investing in it.


The Dividend Decision

Investing for dividends is a very un-sexy way of building wealth. It is the “tortoise” in the race. This is a simple fact. If it weren’t then we’d see stock “expert” bozos on TV jumping up and down every time someone announced a dividend increase.

Dividend investing is a long term strategy that must be, at some level, a part of every income investor’s portfolio. They are easy to acquire, enjoy a nice tax advantage, and are very liquid. If cash flow is your goal, then in this investor’s not-so-humble-opinion there is very little reason not to invest in them.



See you at the top!



Disclosure: I currently own shares in both AT&T and Chevron.
Disclaimer: The author is providing opinion and is not qualified to, nor attempting to, issue investment or tax advice. Consult with a professional before taking any action

January 2015 Income Report

January 2015 Income Report

Image courtesy of renjith krishnan at

Image courtesy of renjith krishnan at

Here we are – my first monthly income and budget report. Now, I dunno if you’re like me, but when I read posts of other bloggers about their monthly expenses I usually just gloss over it the actual numbers and see if they have included any analysis. Sadly, this is rarely the case. So, being the contrarian I strive to be, that will be our focus here.

With January now behind us I like to look back at how my income sources and budget efforts performed and try to learn something so I can do better next time. Now, I know most PF aficionados would probably say that I am doing this upside down (analyzing my expenses in the rears rather than planning them forward) but I can do this because, at this stage in my life, I’ve incorporated frugality into my daily decisions; so tracking every cent as I spend them would just be too mentally taxing (hur hur, money pun!). I’d so much rather spend as I best see fit and hold a “postmortem” at the end of each month to see where I can do better in the following month.


So what can January teach us? Let’s see…

(Oh, but first, if you aren’t already familiar with my budget strategy, the 50/30/20 plan, then click the link and get the background info.)


January Budget

This is what my split is supposed to look like:

Essentials – 50%

Lifestyle – 30%

Saving/Investing – 20%

And here is what I actually got:

Essentials – 56%

Lifestyle – 20%

Saving/Investing – 60%


Budget Analysis

Essentials – Not too bad. I ended up overspending in this category because I forgot to plan in my HOA payment. Without it I would have come in at a cool 49%. Better make sure I fix that on my budget sheet right away so that it is planned in when the next payment is due.

Lifestyle – Being a pretty spartan guy, I typically underspend in my Lifestyle category as a whole. In this month I didn’t go out to eat much and didn’t buy any new books or toys.

Saving/Investing – Right away you’ll notice that 56+20+60 does not equal 100. In this category I routinely try to overspend. This is possible when I have overages from a previous month, new cashflows, etc. This month, when my final paycheck came in, I had some extra funds in my account from commission and wasn’t about to let them just sit there. So I dropped them into Savings.


January Side Hustle & Passive Cashflow – $39.81 (interest only) – $12.07 (interest only)

Dividend Stocks – $43.74


Cashflow Analysis

As much as I would like to continue adding to my Prosper and LC portfolios (earning 9.85% and 11.14% respectively) I realized, quite a while ago, that I was too heavily invested in P2P lending versus my other investments, throwing my diversification out of balance. But instead of selling off part of them in order to rebalance, I’ve been diverting my additions into my dividend portfolio and allowing my Prosper and LC accounts to automatically reinvest my profits for me. (Similarly, I’ve directed each of my dividend stocks to purchase additional shares automatically as well.)

All in all, these investments are performing nicely. “Slow and steady”. That suits me just fine right now, as I’m working on another project that should add a significant income source in the coming months.



  • I was able to get my Long Term Savings back up to its first level (presently 3 months worth of expenses). Won’t feel truly comfortable until I get 6+ months of savings, though.
  • P2P lending passive income from Prosper and LendingClub is up $3.53 (an increase of 6.9% from last month!)
  • Total passive income is now 2.4% of my early retirement goal of $4000/mo.


  • Screwed up by forgetting about that damned HOA payment.
  • I could have done better with my grocery spending too. Need to trim that down by about $20 a week.


Forward Planning

Not a bad month, over all. Since I’ve got some breathing room in the Lifestyle category I’m going to be increasing my Vacation savings (whoo!). And I downloaded an app to help me with my grocery trips (I also remember reading that it’s best to eat before you shop, so I’ll be trying that out too). Long term, I’m taking certain steps to reduce my Essentials, too.



See you at the top!


(And if you want to be able to analyze your own monthly expenses and income then subscribe to my email list above and download a free copy of the 50/30/20 plan I’ve created for you.)

The 50/30/20 Plan – Why I Stopped Worrying and Learned to Love the Budget

The 50/30/20 Plan – How I Learned to Stop Worrying and Love the Budget

Image courtesy of ddpavumba at

Image courtesy of ddpavumba at

That joke might slip by some of you young-guns, but look it up and then watch the movie – it’s a classic and it gets referenced everywhere.

Anyway, back on track, while I’ve always enjoyed personal finance as a whole, I’ve never enjoyed budgeting. Not because I can’t say “no” to a new PlayStation game or a night out on the town, but because it always seemed just so “micro-managing”. Not my style.

Being a fan of Dave Ramsey’s Total Money Makeover I tried it his way; 5,379 individual envelopes filled with hard cash labeled with “Groceries”, “Electric Bill”, “Gasoline”, “Clothing”, etc. But it was a giant pain in my ass to go to the ATM, pull out what I think I’ll need, stuff it into all those envelopes, and then bring whichever envelope to its corresponding store when I could just do what I do now – put it all on my one credit card and pay it off at the end of the week.

Still, I wanted to do better with my money. I needed a new plan.


Ask and You Shall Receive

And then, in an act of providence, I stumbled across the answer I’d been searching for. A strategy so simple that I could implement it in 10 minutes per month. The 50/30/20 plan.

And by the time you finish reading this article I’m sure you’ll want to try it out for yourself. So here is what you’ll need:

  • A Google account
  • A spreadsheet

Got ’em? Good! Now, here are the steps:

  1. Collect your bank statement, credit card, and bill statements from the previous month.
  2. Get a spreadsheet out and chart those expenses across all 12 months of the year but leave the dollars blank. Then add the arithmetic into each cell so that every time you put your expenses in, it will total it up and give you the percentages. (Just kidding, I’ve done that for you. Subscribe to my email list and you can download a free Google spreadsheet I created with all this work already done.)
  3. Divide those expenses into three categories: Necessities, Lifestyle, and Savings/Investing/Debt Payoff. Now, here is the magic…
    1. Necessities gets 50% of your income – this will be items like your rent, utilities, groceries, auto insurance, car payments…things that are necessities.
    2. Lifestyle gets 30% of your income – this will be for items like clothing, vacation savings (how you vacation is a lifestyle choice, after all), dining out, cable/internet, etc.
    3. Savings/Investing/Debt Payoff  gets 20% of your income – this one is self explanatory. Put 20% of your income into saving an emergency fund, or paying off debt, or investing (retirement contributions don’t count in this figure). Pay yourself first and make this an automatic transfer scheduled for the day after you get your pay check.
  4. Every two weeks, add in your expenses.
  5. THAT’S IT!



Now, a few clarifications…

  • Even though the strategy is called the 50/30/20 plan, over time work to reverse those numbers to something like 30/20/50, with 50% of your income going into savings/investing.
  • For bills that come up in odd, or every-few-month, intervals (like auto insurance or membership dues) then add up how much that costs you per year and divide that by 12. Then budget that in as a “monthly” expense. Or chart them ahead of time in the months where you know they will fall.
  • If you get a check on the last day of each month, like I do, then count that income into the following month. Money received on January 31st would, naturally, be spent in February.
  • You may choose to put “car payment” under the Savings/Debt/Investing category instead. That’s fine. You can customize your any which way you like. I kept mine as a “necessity” so that I could add more to my Savings/Debt/Investing category.
  • Don’t worry if a month goes by and your 50/30/20 plan ends up with something like 60/35/15. Life happens. Just look at your numbers at the end of each month, learn from it, and do better next time.



After I began using the 50/30/20 plan I immediately began to enjoy several new advantages. Such as:

  1. I can see the future! – A clear and instantly understandable vantage point on each month’s expenses.
  2. That which gets measured gets managed! – A better view of my spending habits as a whole lets me find patters when I review past months figures.
  3. No more surprises! – I have been able to even out and plan-in some of my more erratic expenses.
  4. I’m now richer! – Understanding how much I’ll need each month, ahead of time, has allowed me to increase various savings and investing contributions.
  5. Fame! – And finally, I’ve been able to share my ready-to-go Google spreadsheet with my friends and family who have remarked how easy the plan is with the math already programmed into the sheet.


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The Total Money Makeover – Review

The Total Money Makeover – Review

The Total Money Makeover

If you have spent any time looking at personal finance books then you have come across Dave Ramsey. In fact I’d wager its probably difficult NOT to be familiar with Ramsey, the man has a radio show, TV show, several books, and hosts seminars and workshops. Today I’ll be giving you the straight dope on a book that many consider his magnum opus: The Total Money Makeover.


What’s Good

I don’t know whether I’d have called the book a “makeover”; it is more like a “total engine rebuild” (but that was probably a marketing decision). I say this because one of the prime goals in his book is to disabuse his readers of bad spending habits and the old BS about money they’ve picked up along the way by beginning the book with an attempt to draw focus on not only people’s money myths but also their denial that they possess them! And on the whole I’ve got to give him points – the book is a very easy read with hardly an instance where he requires the reader to look up arcane financial terminology.

Later in the book Ramsey gives you his “baby steps” to financial security:

1. Save a small emergency fund.
2. Pay off all your consumer and student debts.
3. Save several months worth of expenses as a cushion.
4. Invest for your retirement.
5. Save for your children’s college.
6. Pay off your house early.
7. Give to charity.

You also gain Ramsey’s insights with regard to organizing a debt reduction strategy commonly called “The Debt Snowball“, to fast track your way through debt repayment. And peppered throughout the book is a strong dose of his credit card phobia. And while not everyone who owns a credit card is a helpless spender, let’s face it, with our national credit card debt being in excess of $15,000 per household, he’s got a good reason to take a hardline stance against them.

Finally, there is his “no excuses” attitude. As a matter of opinion, I feel that you cannot separate personal finance from personal responsibility. So, while some more sensitive readers might find him occasionally arrogant or dismissive of their “special circumstances”, I found it encouraging that Ramsey seemed to pull no punches in this department.


What’s Bad

No book is without sin, of course. And I’d be remiss if I didn’t tell you of the areas in which his book fell flat for me. First among them is his envelope system of budgeting. He advises that you label 800 envelopes “Rent”, “Groceries”, “Fun Money”, “Gas”, etc. and carry any envelope you may need with you. This I see not only as a time-waster, but also potentially dangerous. My sister in law, taking Ramsey’s advice, once went out to purchase some major appliances and ended up carrying around town more than $3000 in cash! Crazy!

Another common complaint people have is that Ramsey strongly colors this book with his own Evangelical Christian theology. This takes the form of references to God, quotes from the bible, etc. But even though I am non-religious and find proselytizing to be highly annoying, I did not find it to be much of a bother with this book as nearly any “holy detour” Ramsey takes is relegated to an on-page box that I simply skipped.

I’ve also gotta take a few points off for his reliance on mutual funds, as well. In his book he constantly touts the virtues of “Growth Stock” mutual funds and sites that they have historic returns of 12%. I’m not going to hammer him unfairly, since I’m writing this book with the benefit of hindsight in the market, though. Rather, I am going to simply point out that, as John Bogle points out, many mutual funds nickel and dime their investors to the point that their fees consume nearly every excess percentage point of return over the less volatile Index fund.


What’s Missing

Recognizing that no book can possibly include EVERYTHING a reader may want, I would still have liked to have seen some additional content about other investments for those of us who want to invest beyond mutual funds. He also doesn’t give any advice on how to evaluate a mutual fund, possibly for liability reasons. But you’d think he could at least point his readers to some resources on the subject, or partner with someone who legally can give stock advice.

The book also boasts a large number of anecdotes from Ramsey’s fans lauding his strategies and telling the reader that they, too, can do it if they set their minds to it. Now, as a salesman, I know the value of testimonials, but this book so so jam packed with full-page (and sometimes 2-page) testimonials that it got to the point where it started to feel like page-filler fluff and I just skipped over them. I’d have rather seen a case study or two to illustrate, in hard numbers, HOW a few people used Ramsey’s techniques to get debt free.

Finally, there are several admonitions to the effect that “keeping up with the Joneses” is a sure-fire method of becoming as broke as they are. And while this IS solid advice, it would have been more beneficial to the reader if there was some additional resources that could point where one might obtain some of the “Joneses” stuff without paying through the nose like they did. I mean, let’s be real, if you’re a new employee at a law firm you can’t exactly buy all your suits and shoes off the Sears rack. So a little tip like “shop in consignment stores in the rich part of town” would have gone a long way.


The Verdict

The Total Money Makeover certainly has its flaws, but here is my verdict: Buy it.

It is written in a smooth, conversational tone, with almost no jargon or technical terms. Reader’s of faith will enjoy its affirmations (and non-religious ones can just skip those little boxes), and most importantly you will learn about the “debt snowball” strategy which can save you thousands of dollars and years off the process of becoming debt free.

If you want your own copy, click this link and pick up your own copy of The Total Money Makeover.



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How to Get Out of Debt Quickly

How to Get Out of Debt Quickly

By Valugi (Own work) [CC BY-SA 3.0 (], via Wikimedia Commons

By Valugi (Own work) [CC BY-SA 3.0 (], via Wikimedia Commons

Debt. According to Google, this word is searched more than 18,000 times per month in the United States. And it is no surprise why – according to the Federal Reserve Bank, the American population carries a total of $11.71 TRILLION dollars in debt! (BTW, this is “only” 7 trillion less than our national debt; so it seems that our politicians are indeed, sadly, representing our values). Safe to say we’ve got a debt problem. And it is this writers opinion that like most problems, this problem, and its solution, begins in the home.

Tackling your own debt is among the first steps financial freedom. But how do you do it? Bankruptcy? Debt restructuring company?

No. It all starts with a simple snowball.


The Fastest Way out of Debt

The Debt Snowball is a repayment strategy that has been around forever, popularized by gurus like Dave Ramsey and David Bach. It allows you to structure your debts in a way that not only helps you pay it all off years earlier, but keeps you constantly motivated during that long stretch where it would be so simple to backslide. And it is also very easy to understand and implement:

1. Write down every debt you owe, including total amount, monthly minimum, and interest rate. And organize them from smallest to largest.
2. Pay only the minimum on all of these except the smallest one; pay as much as possible each month on this one.
3. Once you pay off the first debt, take everything you were paying on it and stack it on the minimum you were already paying on the next smallest debt.
4. Lather, rinse, repeat.


No Plan is Perfect

Of course, the snowball is not without its critics and detractors. The first thing that is often pointed out is that by organizing your debts based on the amount owed, rather than the interest rate, you are actually adding months on to the entire process. And while this is true, in terms of the risk that high debt poses to one’s monthly cash flow, I find it much more important to get some “breathing room” by eliminating several smaller debts early on.

Second, it is said that this method is very discipline oriented. You will be required to stick to this plan for months or years during which time you will be constantly assailed by temptations like birthdays, holidays, invitations out on the town with your friends, etc. and unless you’ve got an iron will, it’s going to very difficult not backslide. But, as pointed out in this university study, the Debt Snowball provides psychological reinforcement to resist backsliding by allowing you several small victories in the beginning, as each smaller debt is paid off.

Third, many will point out that this method is only effective if you already make enough money to pay all your bills; since anyone who doesn’t cannot afford to even pay the minimums. Though, this argument sounds much like “I’m allergic to penicillin, so I don’t think others should use it either”.


My Own Experience

Debt Snowball

Debt Snowball

The picture above is a recreation of my own low-tech chart I created years ago. I made this after I learned how the snowball method will show me how to get out of debt quickly. As you can see, I had A LOT of people with their hands out, waiting for my money. And as a regular guy earning a regular income, the entire process took from 2008 to 2014. I had one distinct advantage in this, though: I have very little compulsion for shopping (except for books). You’ll notice that most of my debt was student loans and my truck rather than high-balance credit cards – the fact that I was not ADDING to my debt made up for my somewhat lackluster income.

Later, when I got my current job (commissioned salesman), I would take each monthly commission check and, rather than blow it crap that would make me poor or fat (new clothes, toys, booze, expensive dinners, etc) I lobbed nearly all of it at each successive debt, adding rocket-fuel to the process.


The Takeaway

Alright, so if you’re reading this and wondering how you can get out from under the crushing anvil of debt then there is no course of action I can recommend higher than implementing the Debt Snowball strategy. And to help you in this I have created a free tool for you to use. Just subscribe at the top of this page, download the chart, and fill it out. Then, once you have begun, try these tips to super-charge your results:

  1. Make a new, small, savings habit (making coffee at home, switching to generics at the supermarket, etc) and set up automatic weekly payments of that saved amount through your bank to the creditor you’re currently paying off.
  2. Find extra income through a side job or doing odd-jobs for friends and neighbors in your downtime.
  3. Politely, but firmly, negotiate a better interest rate with your credit card company. And if they refuse, transfer the balance to a 0% promotional card (just make sure the new card doesn’t have any hidden fees or an even worse interest rate).

Getting out of debt quickly is like getting to “base camp” when you’re climbing a mountain; there simply is no summiting without stopping there first. It is going to take time, maybe years, but so what? You’re going to be alive anyway, why not spend your time climbing to new heights?



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Should I Pay off my Debt or Save to Invest?

Should I Pay off my Debt or Save to Invest?


By Toby Hudson (Own work) [CC BY-SA 3.0 (], via Wikimedia Commons

By Toby Hudson (Own work) [CC BY-SA 3.0 (], via Wikimedia Commons

This is often the “Sophie’s Choice” of those on their financial journey, especially those just starting out. And like all economics and accounting questions, it is difficult to answer without knowing the specifics of an individual’s situation. For some it may prove wiser to work exclusively toward paying down bills. For another it could be wiser to place emphasis on investing. The trouble is knowing which is the case for you.


Case No. 1 – Fred

Fred is 24, unmarried, and just graduated college with a BS in Computer Science from a top private university. Upon graduation he lucked out and landed his dream job at the company where he interned (a highly respected tech firm in Silicon Valley). And even though Fred is pulling down $96,000 in income, his student debt is in the six figures range and his posh apartment’s rent alone eats about 50% of monthly take home (he’s also starting to wish he didn’t “celebrate” landing his new job by buying that BMW), which causes Fred to live on a ramen noodles diet three nights a week. Fred is in a tight spot and wants to make some changes to his situation.


Case No. 2 – Samantha

Samantha is a 47 year old divorcee who just waved goodbye as her youngest went off to college (on a full athletic scholarship no less!) and waved goodbye to her mortgage as well – Samantha was clever enough to shop for a 15-year mortgage instead of the standard 30-year – so now her cost of living has been slashed and she’s found herself with a lot of extra disposable income, despite the fact that her alimony stipend has ended. The result effect is that though Samantha only makes $43,000 per year, it is now far more than she needs, since all she’s got left are regular utilities and her car and credit cards left to pay off. And with her 401-K on autopilot, she is starting to wonder what she ought to do with all her newly disposable income and free time.


Case No 3 – Juan

Juan arrived in America in somewhat less than legal circumstances. His mother came to America wanting her child to have a better life than she had, so after paying the coyote’s outrageous fee to bring her across the border, she gave birth to Juan in a Texas hospital, making him a US citizen. Despite the discrimination she sometimes faced, Juan’s mother loved her new country and constantly impressed upon her young son that he must stay in school and make something of himself. And Juan got the message. Upon graduating, instead of going straight into a four-year university, Juan looked at the job market and decided to attend a vocational college and train to become an electrician. He graduated with only $20,000 in student debt and was immediately hired upon graduation by a growing construction firm. Juan is now, in his early 20’s, earning $53,000 per year and after setting up his IRA, he’s started thinking about his future.


The Rub

The reason I took you through these three scenarios should be obvious – to illustrate that most advice people get on the subject of debt reduction versus investing does not take into account personal nuance, individual goals, or needs. For example, in his excellent book, The Total Money Makeover, author Dave Ramsey positively demonizes debt in all forms – even mortgage debt (though he seems to accept that most people must buy their first home with some sort of mortgage). And even though debt elimination is a good thing, do you believe such a hard-line plan is ideally matched for each of these examples?

Still there are other sources which advise to focus building your investment portfolio and paying the minimum on your debts (while not accruing new debt). Their logic is that even a weekend side-business can help provide enough cash flow to pay off those old debts and once they’re gone you still have the business, which is now generating tons of disposable income for you!

Lastly, there books which take a somewhat middle of the road approach. In The Richest Man in Babylon, there is a story of a college professor who was up to his eyeballs in debt but devised a plan to pay off his lenders while still saving money for himself. He and his wife rearranged their finances so they could live on just 70% of their income; 20% went to their lenders and they saved 10% for themselves.


Fred, Samantha, and Juan

Fred recognized that his main stressor was his exorbitantly high monthly expenses, wrought by his college loan, car loan, and swanky apartment. He needed breathing room and he needed it now! Fred decided to focus entirely on paying off his debt, so he broke his lease and moved into a more modest apartment and got a roommate. But he didn’t stop there – he also signed up on Elance to offer his tech skills as an independent contractor and earns a tidy little sum on the side, which he uses to help pay off his car loan. Fred’s got a long way to go, but now he’s on the right track. He calculated that within 18 month’s he’ll have his car paid off and he should be able to start contributing to his company matched 401-K plan.

Samantha had a dream, ever since visiting France on her honeymoon, to open up her own vineyard; and now that she got an empty nest she’s decided she didn’t want to wait until she was 65 to do it. And with the kids now gone she also decided that her large home was much too big for just her by herself. But instead of selling it she decided to rent it and have it fully managed by a professional so that she can pay her remaining creditors while allowing her to focus her energies on her passion. With the equity in her home as collateral she was able to purchase a small plot of land and the materials needed to begin bottling her own high-end sparkling white wine marketed to the affluent in her area wanting to “live locally”.

Juan looked to his own future and decided that, while he liked being an electrician and working with his hands, it didn’t provide him with enough personal satisfaction. Juan, so fortunate in his life, wanted to give back. He decided to divide his income; 15% of it would go toward paying back his student loan, but the majority of his extra income would be saved in order to start a scholarship fund for students looking to enter a vocational college instead of the traditional four-year university.


Finding Your Own Path

It’s clear that standardized advice is just too broad for most people. Your circumstances might warrant one course of action while your neighbor’s might call for another. The trick is figuring out which plan is best suited for your situation.

  • People, like “Fred”, up to their eyeballs in debt with very little, or none, left over at the end of every month must eliminate their debt and reduce their expenses.
  • People like “Samantha” with a nest egg already set aside and large quantities of disposable income and time would do well to focus much of their energies into building a business or investing on a near-full time basis.
  • People like “Juan”, with low debt, highly sought skills, and their whole life ahead of them would often be best taking a hybrid approach and investing while they work.

As for me, I more or less followed the “Babylon” plan, like Juan, but my pay-off strategy was in line with the “debt snowball” plan I read about in Ramsey’s book. This combination allowed me to hack away at my debt and save to buy my first home at the same time.


What is/was your debt pay off strategy?



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