Gather Little by Little

I have a great fascination for the great philanthropists in our history and the great spirit of philanthropy that permeates our culture. Did you know that Americans give more money voluntarily than the citizens of any other country? We give seven times more money to charity than the citizens of Germany for instance. Another example is the absolute tsunami of cash given to the Asian Tsunami relief effort in 2004. Americans privately gave over $2 billion and our government chipped in another $900 million. The generosity of our country is absolutely astounding. If you would like to learn more about this subject I highly recommend Albert Brooks’ book about charitable giving entitled Who Really Cares?

Why do Americans give so much?

The first reason is fairly obvious: we have been financially blessed beyond any other culture or country in history. Therefore it is incumbent upon us to share those blessings with those who need it as much as we can. Another reason is that our government reduces our tax burden in the form of IRS tax deductions when we give to non-profit organizations. The gift deduction incentives generosity.

Don’t be motivated by just the tax deduction.

It is important to remember that a tax deduction is not a right, we are not necessarily entitled to a charitable tax deduction in our country’s founding documents, but it is a wise benefit that our leaders have given to us. The result is the huge number of charitable organizations and non-profits that have sprung up in our country. Tax deduction or not, we all need to take some time to consider what we can do to use our financial blessings to help our fellow man.

Your gifts are needed now more than ever.

Thomas Paine once famously wrote, “These are times that try men’s souls.” If you happen to be an administrator at a charitable organization these days, you are certainly under pressure. The need for service to humanity is greater than ever, but the funding is drying up.

Most charities depend on major donor gifts and many of those gifts are usually tied to some kind of investment. Some charities have the luxury of a foundation behind them, but the assets of those foundations are almost always invested in the stock market in one form or another – the same market that has lost almost 40% over the last year.

Major gifts to charities are down because of the economy and the dependence of major gifts on the market. While you and I might not be able to give a major gift of stock or annuities or bequeath an inheritance, we can all find a way to give a small gifts. Imagine the blessing for charities who were formerly dependent on large gifts were to suddenly find an upsurge of small gifts from people without great wealth.

Don’t have a favorite non-profit?

They are not hard to find. There is probably a charity within walking distance of your house that needs some help. Ask your friends and family about charities that they like. When I am considering a gift to a non-profit, I always check out my chosen charity at Charity Navigator. The list of charities on this site is almost exhaustive. You can find almost every charitable organization in the United States and they are all rated on several different levels. You can see what percentage of your money actually helps the recipients. You can find out CEO compensation and even leave a comment of your own about a particular charity.

Let me suggest some charities to you that I have impressed me. Part of the reason that I hope to gather my money “little by little” over my lifetime is so that I am someday in a position to help one or more organizations like St. Jude’s Children’s Hospital which exists “to find cures for children with cancer and other catastrophic diseases through research and treatment”. Another organization that I support is Samaritan’s Purse, one of the foremost disaster relief organizations in the world.

So how about you? What organizations do you like? Is there a local charity that you admire? Maybe you work in a non-profit and you could share some information about giving levels over the past few months.

Photo by: HowardLake

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“Nope, no credit cards for me.  I don’t even carry one.”  I cannot tell you how many times I have said this phrase or something very similar to friends and family over the past 3 years.   Most recently it came up at the store while looking at a “great deal” on something in the electronics department.

I was talking with a guy there who was considering purchasing the same item.  Since we hadn’t allocated the money for it in our budget, I decided to pass on it.  I said something to the effect of  “I’ll have to pass this time, I don’t have the money.”  to which he replied “Heck, I’m buying it.  That’s what credit cards are for right?”  I wanted to just walk away, but since he asked, I just couldn’t help but reply: “No.  You’re using money you hope you’ll have in a few weeks.  If you don’t or you elect to not pay it off, you’ll end up paying more for it than you would have without the deal…potentially way more.”  He looked at me with a deer in the headlight look, and I just walked away.  It was obvious that he really wasn’t looking for an answer, nor did he want to hear a lecture on credit cards.  His mind was made up.

My wife and I stopped carrying credit cards when we had our financial epiphany.  We cut up our credit cards and haven’t carried one since.  Unfortunately we still owe on them, but we haven’t used one in a long time.  Here are just a few of the reasons why we stopped and why many of you reading this should consider stopped too:

Buying things you can’t afford

It took me years to realize it, but we (more myself than my wife) used credit cards to buy things we couldn’t afford.  If we went to a store, saw something we wanted (and wanted now) and if we didn’t have the money to buy it, we would use a credit card.

I distinctly remember walking into an HH Gregg store looking at large screen TVs.  I remember convincing myself “that I deserved it“.  I worked hard right?  I made sacrifices for my kids right?  I deserved this TV.  My wife applied for a zero % interest deal they were offering (I couldn’t apply as I wouldn’t have qualified due to the amount of outstanding debt I had).  We walked out a few minutes later with a $3000+ big screen TV.  I can’t believe how stupid we were.

Everything came to a head for me when I was buying groceries and gas one night on a credit card because we had no money in our checking out.  A huge sign that you’re in big financial trouble is when you’re buying life basic items on credit because you don’t have the cash.

You can barely pay the combined monthly payments

A very common financial tool that myself and many other personal finance bloggers talk about frequently to assist with paying off debt is the Debt Snowball.   I have a debt snowball now, but the first one I had was a very different kind.

I had my first credit card as a teen.  I got a few more in college, then a few more after I was married and employed, then a few more later.  After a while I probably had more than 5-10 different credit cards, all maxed to the limit.

The initial minimum payment was easy, but the payments snowballed on me from there.  Each minimum payment from a card added to the next and then all of the sudden one evening I had more minimum payments than I could make!  Believe it or not, I actually used other credit cards to make minimum payments on my credit cards!

The worst part is that at the time, those minimum payments weren’t even enough to keep me ahead of the game.  The credit card companies were loving me.  I was paying huge amounts of interest on items I had bought years before and making zero progress on getting the balance down.  I’m pretty confident I was on their list of top 10 best (read stupid) customers.

Living off of potential future income

After getting our finances under control, I realized at some point that when you make purchases on credit cards, you are using someone else’s money.  In my case, I was literally using someone else’s money because I didn’t have any of my own.  When that finally clicked with me, I felt terrible.  I wasn’t good enough at managing my own finances, so in order to live I had to rely on someone else that could.  Looking back, I still can’t believe I didn’t see that.  If you are struggling with debt, please re-read what I just wrote and let it sink in.

Using credit cards, you are also borrowing off of your future income.  If you buy something today on credit that you intend to pay off next month or maybe even over the next few months, you’re making the potentially dangerous assumption that you’ll have the money then.  This is not a safe assumption to make, especially in today’s economy where lay-offs are becoming far too prevalent.  Instead, live off of money you have now, not my money you hope to have sometime in the future.

Stop being slave to the lender

I realized this pretty quickly when I was calling credit card companies asking for reversal’s of $40 late fees and decreases in 28%+ interest rates that I was definitely slave to the lender.  I had nights were I wouldn’t sleep due to the stress of having more than $60,000 – $70,000 dollars in debt (excluding our mortgage) and having no clue how in the world I would ever pay it off.  I some how had convinced myself that it was normal, that everyone had a large amount of debt and that it was just the American way.  I had a dark cloud of debt following me around everywhere I went.

I finally got tired of not sleeping, worrying and relying on those credit card companies.  I finally did something about it.  While I’m not debt free, I’ve paid off more than $50,000 in debt in the last 3 years by selling things, using a debt snowball, and through cutting up our cards to avoid going in the wrong direction.

We’re still slave to the lender, but far less than we were.  If things go as planned, in 2-3 more years with the exception of our home, we’ll no longer be slave to the lender and will be debt free.

How about you?  Do you use credit cards?  Why or why not?  Did you have a major turning point like I did?  What did you do?  Add a comment!

Photo by: smlp.co.uk

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This is a picture of the one of the new prototypes being tested by GM now that the government is running the company.

Just kidding!

A couple of weeks ago we took our three kids to a children’s museum near our home. This particular children’s museum is not really a “museum” with static displays and plaques to read, rather it is a place for children to explore with their hands. There is something for almost every level of childhood. Seven month crawlers up through ten year-olds can find plenty to do.

Our two-year old boy spend most of his time playing in a life-sized fire truck complete with flashing lights and real fireman gear. Our four-year old girl spent all of her time in a kid-sized grocery store and kitchen, purchasing fake food, cooking it and then serving it to the customers.

Our six-year old kindergartner wanted to play with junk.

She led me over to a row of cubicles that housed simple tools and fasteners and asked me to help her make something out of junk. Along the back wall were a dozen or so bins full of empty, but clean milk cartons and plastic fruit containers. There was cardboard tubing and food boxes of every shape and size. There were small, odd-shaped pieces of wood and bins of full of yogurt cartons and egg cartons. We soon commenced on the project that you see above.

The museum personnel had placed directions for various projects throughout the area, but we soon figured out that the pieces of junk pictured in the directions did not necessarily match up with the junk that we had available on that particular day. It turned out that the product of our labor did not look like anything in any of the pictures.

We were limited to the tools at hand. Some of the tools and fasteners were not ideal for their application, so it challenged our resourcefulness and creativity. I guided the entire process, but I always encouraged my daughter try to solve a particular problem before stepping in with an answer. The pipe cleaner windshield wipers were all her idea.

I thoroughly enjoyed spending this hour with my child and observing her mind and hands at work. I delighted in watching her try to solve the problems posed by trying to reconcile the limits of the tools and materials at hand with her unlimited imagination. I could tell that she was experiencing a great sense of accomplishment as that little car took shape and seeing her excitement with the finished product brought a great feeling of satisfaction to me. Working with a pile of junk turned out to be a great way to spend an hour with my daughter.

The biggest surprise for me was when we arrived at home and my daughters ignored their store-bought dolls and other perfectly molded toys in favor of playing with two plastic strawberry containers bolted together with brass brads and milk carton caps for wheels. For about two weeks that piece of junk occupied a prominent place in their daily play before it completely bit the dust.

Leftover food containers?

Free

One hour of my time?

About $20 (according to my employer)

Leftover food containers plus one hour with my kids?

Priceless

So, what does this story have to do with money? Why are you reading an article about a homemade art project on blog dedicated to gathering “little by little to make it grow”? The truth is that I am not ready to give the answer right now, I want to see what GLBL readers think first and maybe later today, if you still haven’t figured it out, I will tell you how I think a little junk relates to personal finance.

So, who will be first?

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The current recession is really causing a number people to take a hard look at their cars and how long they intend to keep them. Americans are holding on their old autos longer instead of buying new models. In 2008, the new auto market experienced a 16-year low. Used vehicles being traded in at dealerships averaged 6.3 years of age after the Wall Street meltdown in late 2008, about 6 months older than before the crisis, according to forecaster J.D. Power & Associates.

Keep your car longer

Keeping your car longer requires keeping it well maintained. Not to mention keeping good tires on it, paying for oil changes, fixing things when they break, replacing the shocks, and who knows how many windshield wiper blades. With all of the required maintenance, your car may run for 200,000 or more miles, but is it really worth the cost?

According to Consumer Reports magazine, keeping your car longer, specifically for 200,000 miles over the course of 15 years can save more money than the purchase price of the vehicle itself.

Here’s the recommendations from Consumer Reports for making your car last the long haul:

Buy Smart

Buy cars with a high reliability rating.   Both Consumer Reports and Edmunds.com provide comprehensive reliability ratings on cars. Purchasing a a car that has a high safety rating based on performance in government and insurance safety tests is also an important consideration and will go a long way to allowing you to keep your car longer.

Don’t Skimp on Maintenance

While it may seem to make financial sense to skip every other oil change, skipping even one oil change can result in engine wear. Engine wear ultimately leads to less lifetime. So keep those fluids changed, tires rotated and filters clean. One word of caution, do not rely on your local dealership of mechanic to provide maintenance intervals and recommended services. Consult your owners manual for required maintenance items.  You might want to even consider changing your own oil, but take a hard look on whether changing your own oil worth the cost savings.

Pop the hood

I know, some of you are cringing at this point…trust me, it’s not that bad. Consumer Reports encourages people to open their hoods and check for any unusual sounds, sights, or even worse smells. These are generally early warning signs for potentially big problems. Look for things like cracked hoses, exposed wires, cracked belts, liquid leaks, and insure the battery is clean and the terminals aren’t corroded. For the most part your engine will be dirty, but it shouldn’t be caked in oil or have pools of anti-freeze anywhere. If you see lots of oil on the engine, under your hood, or elsewhere, you should get the vehicle serviced.

Items like fan belts, cracked hoses and fluid refills are relatively easy to do. If you are mechanically inclined, you can save money doing these minor repairs yourself.

Don’t skimp on parts

One of the biggest mistakes you can make is purchasing low quality, off-brand, or even used parts. The cost of doing so could be much worse in the long run.   I’m not saying that these are bad options in all cases, but just do your research. You certainly don’t want to save $100 on a part just to turn around and pay $1,000 due to the damage the failed part caused.

Keep it Clean

The best way to avoid buying that shiny new car is to clean yours.  Spend an afternoon really giving it a good wash and wax.  Not sure how to properly wash a car?  Read my article on how to wash your car and save money.  To keep costs down even further, consider using homemade car cleaning products. Clean out the inside, clean the inside, and shine the tires. You’ll be amazed at how much better you feel about your car. Not to mention keeping your car clean will keep it running longer and make the paint last longer.

I currently drive a 2000 Ford Expedition with 116,000 miles.  Before that I drive a 2001 Nissan Sentra with 125,000 miles.  I loved both cars.  Any guesses on how much longer my Expedition will go?

Do any of you drive cars with more than 100,000 miles on them? How about 200,000? What tips do you have for keeping your car running so long?  Add a comment!

Photo by: streetoftrees

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Last night I attended a Dave Ramsey Town Hall for Hope at my church. It was an outstanding presentation and I would like to offer a summary to those of you who missed it.  Ramsey is a great speaker and this presentation was no exception. He mixed sound principles with humorous, pithy sayings to create an end result that was both calming and inspiring.  The key word for the entire meeting was obviously hope and Ramsey started things off by saying that real “hope” comes from the people of our country – not necessarily Washington D.C. or our media.

Over the past twenty-five years our country has experienced unprecedented prosperity, but as a result of our financial blessings, we started to get a little fat.  Things were a little too easy and many people in our nation became careless with their finances.  Another result of this prosperity was that even when people made stupid decisions, things worked out because of the free flow of money and credit.  As Ramsey said, “Stupid was not getting a stress test, any idiot could make it.  Even a turkey can fly in a tornado.  But last year the American family had a car wreck.”

Mr. Ramsey said that the panic started last fall with some of the big banks, then it spread to Wall Street, then to Washington D.C. and finally there was a media meltdown.  He personally did not believe the panic was warranted at first, but after a trip to New York, where he spoke with friends of his in the media first-hand, he started to believe the panic.

He had encountered the spirit of fear.

As Ramsey reflected on this new found fear, he realized that he needed to claim the truth of II Timothy 1:7, “For God has not given us the spirit of fear, but of power, and of love, and of a sound mind.” As a believer, he could not allow himself to be dominated by fear, but rather to embrace hope.  “Fear is not a fruit of the spirit; fear is the antithesis of hope. Fear is false evidence appearing real.”

Later on during his presentation, Ramsey pointed out that our current economic conditions are nowhere close to how bad things were during the Great Depression, furthermore, we have had at least two recessions, one in 1975 following the Nixon resignation and the second in 1981 following the Carter administration that were worse than current conditions. We have been here before.

Our culture needs a resurgence of a short, simple word: NO!

Mr. Ramsey challenged all of us to embrace hope, but he pointed out that our way of life might need to change a little. The Great Depression was a terrible time in our nation’s history, yet the children of the Great Depression developed the virtues of creativity, thrift, self-reliance and self-control and put them to great use throughout their lifetimes. Those virtues are no longer a part of our society and it is possible that this present financial crisis will inspire a return to those valuable ideas and habits.

Perseverance is the #1 quality of successful people.

In further comments on our culture, Ramsey pointed out that we have developed an unhealthy insulation from failure:

There is an idea that no one should ever have pain, but the truth is we need to love people enough to allow them to fail. Failure is cleansing, it is corrective. Failure will turn you toward excellence. If there is no chance you can fail, there is no reason for you to be your best.

He quoted, John Maxwell, author of the book, Failing Forward,   “Success is merely a pile of failures, that you are standing on.”  We need to go back to personal responsibility. Work harder, think better. Ramsey himself faced a severe financial trial in his life and after going broke, he spent six months whining and feeling sorry for himself.  Finally, one of his friend said, “You know whose fault it is? It’s your fault – you have to fix this mess.”

Work like it all depends on us, pray like it depends on God.

Prayer is sometimes code for “I don’t want to face reality”. There are some believers who even hide laziness behind prayer. Like Dave said, “You can pray while you’re working.” Proverbs 13:4, “The diligent prosper.”

Practical advice from Dave Ramsey as we move forward

One-hundred percent of fifteen year periods in the stock market history have made money.  The stock market has come back 22% in the last seven weeks and Ramsey believes that well-run companies will be worth money in the future.  He is continuing to invest in the stock market and the the real estate market.

A fifty year low in interest rates plus pent-up demand in the housing market plus huge inventory means that the real estate market is set to come back in a big way.

“I don’t do business with big banks. I support small banks and credit unions; the small banks are safer and more personal than the big banks.”

“We need to get Congress to slow down spending; they are burning money.  Our money is becoming worth less, but our economy is not fragile enough for inflation to break us.”

“Gold is the snuggie of investments: it is a crummy investment.”

I came away from Mr. Ramsey’s presentation with renewed confidence and energy to find a way to make things work. There are hurting people in our country and we need to do everything we can to spread hope and help each other dig out of this mess.  Ultimately, God is in control and He has promised to meet our needs – but as you put this promise to the test, do it with your boots on.

Photo Credit: radiant guy

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