Are Parents Terrible Financial Role Models?

This Friday, Dan Kadlec of Time discussed the findings of a study that discovered that parents are terrible financial role models. In Week 1 of Financial Peace University, Dave Ramsey discusses in the Super Savings lesson that parents make their children believe that they don’t have sex or money, to which he remarks, “It turns out, they had both!”

There are a number of topics that strain the parent-child relationship, and money is one of those topics. Although my family did not discuss money openly, my grandparents, particularly my grandfather, were decent role models. Unfortunately, I succumbed to peer pressure and tried to live like everyone else during my 20’s and learned to appreciate their lessons later in life.

If it ain’t broke…

My grandparents married in the early years of the Great Depression. They started out with little to no assets. In fact, their first home was a one-room shack. According to my grandmother, the home required regular pat-downs of sprinkled water with a broom to keep the dirt floor from becoming dusty. When both passed, their net worth was in the black. Although they had a few debts, paying them off was a non-issue since they secured the savings and investments to cover the remaining balances.

While they were alive, they shared weird lessons:

• Pay for purchases using cash. When my grandfather purchased a vehicle, and when my grandmother purchased a new living room set, they paid for those purchases using cash.
• Don’t fix it (or replace it) unless it breaks. Whether it was the washing machine, the garbage disposal, the vehicle, the fence line, or the plumbing, my grandfather would attempt to fix the item himself, hire someone if he couldn’t, and then get first and second opinions before he ever replaced an item.
• Pay your bills on time and in full each month. As my grandfather aged and his fine motor skills weakened, I was given the role of writing the monthly checks. He would lie out the envelopes each week, which had been opened initially when they arrived. He would verify the amount the amount to be paid and had me list the date and amount paid on the invoice and in his business-type checkbook register.
• Save for a rainy day with safe, reliable investments. My grandfather saved a decent amount of money in the bank to cover unexpected expenses such as hospital visits and home emergencies. He also invested in real estate by paying for properties in cash.

My grandfather didn’t have an MBA. He wasn’t a college graduate. To the best of my knowledge, he never graduated from high school. Life was his teacher.

Last Will and Testament

The one lesson I wish he would have taught me before he passed was proper estate planning. Like most families, he was very private about the specifics of his nest egg. Unfortunately, he only verbally declared where he wanted his money to go after he passed. Although each family member was well aware of his intentions, the lack of a will forced his estate into Probate Court. No matter the amount or the value of property, money and entitlement changes people. In my conversations with various individuals and families, I have learned that no family is immune to the heartache caused when money matters affect family matters.

Let’s Talk About It

It may be a difficult talk to have with your children. It may be a difficult talk to have with your parents. It is a critical, honest talk that each side needs to have with the other on a continual basis.

Going Old School: What To Expect When You Take Financial Peace University

At the beginning of each spring and fall, you can expect a number of churches across the country to begin promoting Dave Ramsey’s Financial Peace University (FPU). Personally, I am a huge advocate of FPU for the simple fact that I have seen the program help change lives.

My spouse and I will begin facilitating our third set of FPU classes within the next few weeks. When we originally purchased the FPU Kit at a Dave Ramsey Live Event in the spring of 2010, we sat the kit down, looked through the contents, and passively looked for a class in the fall of 2010. Unfortunately, we could not find classes that fit our schedule close to home. We waited a few more months, and finally found one that was definitely worth the wait in the spring of 2011. We had a great coordinator and facilitator who cared about our progress.

We could not have imagined what the classes would do for us financially, emotionally, and spiritually. We attempted to pay down debt on our own, but FPU really helped us to get Gazelle Intense. Additionally, it was great to know that there were others, like us, who were simply sick and tired of making payments each month with so much of it going to interest. Saturday Night Live has even poked fun at the topic of credit and consumerism with the following skit:

Saturday Night Live – Don’t Buy Stuff

So, what can you expect when you take Financial Peace University? You can expect to go old school by paying for purchases using only cash or your debit card. You’ll also learn to:

• Build a budget,
• Start saving money for your emergency fund,
• Eliminate debt with the Debt Snowball,
• Retire with dignity,
• Pay off your home early,
• Save for a college education,
• Accumulate wealth, and
• Give like no one else!

Personally, I have given away a few of Dave Ramsey’s books and an FPU kit, and I am grateful I can help others get a jump start towards changing their family trees. The cost to attend FPU is roughly $100 for all of the study materials, but it is well worth the investment. Since the kit comes with a Lifetime Membership, you could attend refresher classes later at no cost to you at any site that offers FPU.

This weekend, I spoke to a number of people who were very happy to have gone through the program. These people are just like you and me. They are:

• single, married, divorced, or widowed;
• mothers, fathers, sisters, brothers, daughters, sons, grandparents, and pet parents;
• uneducated and educated with G.E.D.’s to Ph.D.’s; and
• unemployed or working, earning low incomes and high incomes.

On a final note, Financial Peace University is not the only program out there. Gail Vaz-Oxlade, Suze Orman, Clark Howard, and a number of other financial gurus have similar programs to help you pay down debt and save money. I encourage you to take a look at various programs and find one that works for you and your situation.

Will FPU work for everyone? By all means, no. If you follow the Baby Steps diligently, you will start pay down debt and grow wealth. It won’t be easy, but it was worth the sacrifice to my family and the students in our FPU classes. On the other hand, if you continue to use money as you do, then I can pretty much guarantee that things will not change, and may even get worse regardless of whose plan you choose to follow. Unfortunately, not everyone is ready to stop using credits cards, stop taking out student loans, stop financing new vehicles, and stop buying into the current trends. It’s harder to hear this when people admit that they are broke, but refuse to change their lifestyle.

As for my family, and me, we’re done keeping up with the Jones.

Going Cold Turkey: Goodbye Debt! Hello Debt Snowball!

When we decided to say no to credit, the decision was an easy one. In practice, life without credit does present some new challenges, such as completing school debt free. (Note: This blog is part of a college course I am taking this semester. The course was paid for in cash.)

At the time, we had credit cards, store cards, a line of credit, personal loans, medical bills, a vehicle loan, a mortgage, and an overwhelming amount of student loans. The weekend we decided to say no to credit, we had just attended the Dave Ramsey Live Event. We knew that we had an unhealthy amount of credit in our lives, and we wanted financial wellness in our family. Although our family consisted of two adults and two dogs, we were very concerned about the impact our current spending habits would have on our future children. So, in March of 2010, we went cold turkey and stopped borrowing credit. We saved $1,000 in our Emergency Fund. Then, we started Baby Step 2 and began attacking debt with the Debt Snowball. Other experts such as Larry Burkett or Gail Vaz-Oxlade may refer to this as the Debt Repayment Plan.

What is the Debt Snowball?

This method of attacking debt makes you list all of your debt (except the house) from smallest to largest based on how much you owe. You’ll continue to pay minimum payments on all of the debt, and if you have any excess funds after paying the minimums, you apply it to smallest debt. The idea is to gain momentum and meet progressive milestones as you eradicate debt from your life. This will change your life – seriously! Click below to hear Dave Ramsey explain the Debt Snowball.

We modified the plan and decided it was best for us to pay off everything that required a current monthly payment such as our current credit cards, store cards, line of credit, and our vehicle loan. Everything else that was past due just had to wait their turn. Sure, we received phone calls and letters from collectors, but we weren’t anxious anymore because we had a budget and a debt repayment plan. Those collectors waited this long. They can wait a little longer.

While working the Debt Snowball, we incorporated some of “Gail’s 7 Rules for Debt Repayment” into our plan. Since we were approved for forbearance on our student loans, we are able to focus on “Current Debt” first. The “Past Due Debt” had already been sent to collections, written-off, or in forbearance. So far, we have paid off two credit cards, two store cards, the line of credit, and a few other things. In addition, we refinanced our vehicle loan and received a lower interest rate. We are a few months away from paying off the vehicle loan.

In our family tree, we’re winning! We’re bailing ourselves out of debt!