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Get a Deal!

I found some new coupons off Hustler Money Blog for this month, check them out:

1. Circuit City $40 off $199 is good until Oct. 30th
2. Best Buy 12% off is good from Oct. 5 to 8th
3. Office Max $10 off 20 Coupon is good until Oct. 30th
4. Babies R Us 15% off coupon is good until Oct. 14th
5. Border’s 25% off is good until Oct. 8th
6. Staples 12% off is good from Oct. 14th to 20th
7. Jamba Juice Buy One Get One Free
8. Toys R Us 20% off Oct 8th
9. Home Depot 10% off coupon
10. Lowes 10% off

ING Direct Shout Out - Free $25 for Signing Up!

I have been banking with ING Direct for the past 3 years and have been a strong advocate of them all along the way.

I always recommend that people set aside money in an emergency fund that is 100% liquid. Usually I will direct them to ING Direct because of the 4.3% rate as opposed to the whopping 0.25% that local banks offer in their savings accounts.

I feel that when interest is paid TO YOU this is good. When you can get more that is BETTER!

I have talked many times about alternative income streams and this is a major component on what comes in (from me just sleeping).

Plus right now all ING Savings accounts are paying 4.30% and are FDIC insured up to $100,000. What this means is, it is not risky. ALSO, by following a link from an existing member, ING will IMMEDIATELY GIVE you $25 if you open your savings account right now with at least $250.

You can even set up your account to automatically draft your account on a set frequency (weekly, monthly, etc).

INTERESTED? Just click one of the following links below.

These links are one-time use only links so if you see this message:

"We're sorry, but the referral link within the email you received has expired and is no longer valid. We recommend that you contact the sender and ask them to re-send the referral email. Or click 'Continue' to proceed with the application process without the account opening bonus."

Then just go on to the next link.

Link #1

Link #2

Don't Make the Same Mistake Twice

I have heard a lot of people talk about "re-establishing" their credit after getting themselves into a mound of trouble through debt. I just read an article saying the best way to re-establish your credit after a bankruptcy is to get a low-limit credit card, make small purchases, then pay it off early each month.

I am sure it does help your FICO score, however, I have a problem with this advice for two reasons.

#1) Why should you care about increasing your FICO score anyway? All a FICO score is for is to allow you to borrow MORE money (even though that is the thing that got you in financial ruin in the first place.)

#2) This advice takes the "human" element out of the equation. If personal finance was 100% finance and 0% personal then my advice would be different, but it is inaccurate to say this.

When a person files for bankruptcy it is because they were so far in debt the could not get out of it. At this point isn't this something that that person should avoid rather than jump back into it?

I advise people to not be concerned with "re-establishing" their credit. There are steps that you can take that we talk about on this website that will enable you to eliminate debt completely from your life. The only thing that I consider "acceptable" debt is a home mortgage and getting a home mortgage is a different kind of beast when applying for it.

The lender is 100% concerned with probability of paying it back (not with FICO score). If they see your savings increase and you don't have any new entries on your credit report they will notice this (not just the FICO score). In fact, I don't know of any lenders out there who would even turn down somebody that drops a 20% down payment on their house.

Dave Ramsey says, "The definition of insanity is doing the same thing over and over and expecting different results." Getting back into what got you into a mess in the first place could be considered insane.

Extended Warranties: Are they a good idea?

I might not put this issue to bed but I can at least tell you my thoughts. I know many people swear by them and I know some people who say they usually get their money's worth out of them.

I am fine with people having that point of view. However, in my experience I have not gotten my money's worth out of them and I usually say that in most cases it isn't a good idea to get the extended warranty. Now before you get mad at me I can show my work behind how I came up to this reasoning.

An extended warranty is basically insurance. And the price/cost of insurance is driven by 4 factors: commissions, overhead expenses, the statistical probability of the event occurring, and profit. The cost of your warranty has to cover all of those things and I do not like the sound of that. What I actually would recommend is to set aside the amount of most extended warranties and I would be able to cover average repair costs and still come out ahead.

Generally, extended warranties are extremely profitable for those that are selling them and a bad idea for those buying them.

How much is too much house?

Earlier this week I mentioned that one of the most often ways people get themselves into a struggling financial situation is they allow their car payments or house payments to be larger than what they can afford.

If you did not read the post on Car Payments you can check it out here.

The stage of life that I am currently in (early to mid 20's) is extremely foundational. I find that a lot of financial (mis)behavior habits go into effect around this time in a person's life. Usually after graduation you will find yourself with more cash than you ever have had before. For the first year or two you are allowed much freedom and seem to spend money on whatever you want, whenever you want it.

However, this might work out for the first year or two but this develops a habit that is not easily broken. As you get into later years you begin to commit to more financial obligations, which leaves you strapped and in a tight situation. This is the turning point and usually people will resort to using unsecured debt as an option which puts them in bondage that they cannot break free of for many many years.

More times than not, this "financial obligation" that leaves you in a tight situation is usually caused by the house. Because your house payment might end up being too much for your take home pay, it leaves you extremely tight in all other areas of life. And if this is combined with a lack of adamant budget and preparation its seems like there is no other choice but to turn to debt.

Now on the flip side I want to offer a guardrail to guide your house buying decision that may come up in the near future. This is not scriptural this is just what I believe to be wise after listening to many financial "guru's" over the years.

House Rule #1: Do not have a house payment that is more than 25% of your household take home pay.

When I get opposition to this from people my age it is always because they want to have a standard of living that is comparable to what their parents have. The only problem with that is it took their parents 20+ years to obtain that, which should not be obtained within the first few years of working.

I want to provide an easy to understand grid that might help put some skin on this rule. The assumptions to this grid is 100% financing (which I do not recommend but will talk about later) and an interest rate at 6.5%.

30 Year Fixed Loan

Annual Income	Monthly Income After Taxes	Monthly Payment	House Value
$30,000	$1,875	$468.75	$74,161.32
$35,000	$2,188	$546.88	$86,521.54
$40,000	$2,500	$625.00	$98,881.76
$45,000	$2,813	$703.13	$111,241.98
$50,000	$3,125	$781.25	$123,602.20
$55,000	$3,438	$859.38	$135,962.42
$60,000	$3,750	$937.50	$148,322.64
$65,000	$4,063	$1,015.63	$160,682.86
$70,000	$4,375	$1,093.75	$173,043.08
$75,000	$4,688	$1,171.88	$185,403.30
$80,000	$5,000	$1,250.00	$197,763.52
$85,000	$5,313	$1,328.13	$210,123.74
$90,000	$5,625	$1,406.25	$222,483.96
$95,000	$5,938	$1,484.38	$234,844.19
$100,000	$6,250	$1,562.50	$247,204.41

15 Year Fixed Loan

Annual Income	Monthly Income After Taxes	Monthly Payment	House Value
$30,000	$1,875	$468.75	$53,810.82
$35,000	$2,188	$546.88	$62,779.29
$40,000	$2,500	$625.00	$71,747.76
$45,000	$2,813	$703.13	$80,716.23
$50,000	$3,125	$781.25	$89,684.70
$55,000	$3,438	$859.38	$98,653.17
$60,000	$3,750	$937.50	$107,621.64
$65,000	$4,063	$1,015.63	$116,590.11
$70,000	$4,375	$1,093.75	$125,558.58
$75,000	$4,688	$1,171.88	$134,527.05
$80,000	$5,000	$1,250.00	$143,495.51
$85,000	$5,313	$1,328.13	$152,463.98
$90,000	$5,625	$1,406.25	$161,432.45
$95,000	$5,938	$1,484.38	$170,400.92
$100,000	$6,250	$1,562.50	$179,369.39

Use this grid as a guideline when deciding how much house too buy. I do not care how good of a deal you get on a $200,000 house. If you cannot afford it, it will end up put you into a financial mess. When this is the case you cannot even enjoy living in the awesome house because things are so tight financially.

The Planning Process

Having a plan is the most basic core principle that I try to teach. If you strip back all the practical application, all of the "theology of money," all stories or illustrations, I am basically saying to have a plan.

Tell your money where to go instead of wondering where it went.

Hopefully if you hear anything, you will hear this. Now, I am about to expand on logistical planning. Most people who know me will be surprised to hear me say this next statement but it is the truth and I don't really say it that often.

You can only plan so much.

I am serious.

There are 3 basic stages in personal finance planning:

1.) Short Term Planning
2.) Mid Range Planning
3.) Long Term

Long term planning is roughly anything over a year away. There are many things that we should be planning for that are a year away or over. An example of Long Term Planning is retirement. I think you should be planning from this and early on in fact. Another example is a new (to you) car. This will come up at some point, you might as well be prepared for it.

I also think there are things that come up within a year that you should plan for in advance; these are mid range planning items. Christmas, Birthdays, Vacations, Real Estate Taxes, etc. all fall under this. We know these things come up, we need to plan for them.

Next is short term planning. I do not want you to plan for monthly expenditures in advance. Each month is new. Each month things will change. For example my gas expense has now changed because it is football season and I go to all the Clemson games. This has increased my monthly gas expenditures a great deal, which effects my planning in other areas. Another example is you might know you need to get an oil change this next month, that changes your car maintenance category, which might change something else.

Let's say you had a friend who was about to play a game of chess. And let's say you are a chess expert and he came to you and ask for help. You would not give him step by step instructions on moves he should make. This is not a wise thing to do when playing chess because things change rapidly. The same is true with finances. You can have a basic goal/intent to take the queen or put the king in checkmate, but how you get there is a changing process.

It is a good thing to make goals and plans, but the details will be changing. It is important that we understand this so that we will not be frustrated with a process where change is inevitable.