By Mark Jackson [MJ LifeCoach]

This past week I made some positive strides which should help me out greatly in the long run. What helped me most was when I took a few minutes early in the week to identify a few problem areas that have been hindering my progress and then came up with a “solution” for these problems.

Just like any 12 step program, the first step to solving a problem is admitting to yourself that you have a one. One of my coaching students called with an opportunity which needed solving. I told her, she can’t solve most problems right now, but you can decide to do is identify three areas that need changing. This way you won’t get overwhelmed and you won’t get down on your self for having so many problems.

Problem #1: Broker
My student is marketing a house with a broker and needed to sell the unit being listed. She realized it was not really working out with the current broker. The main reason for this was that she wanted to learn the basics of being an agent and the transaction process and since the brokerage was a one man shop he had no time to really “train” her. Another reason was that the office was just so far out of the way that it made it difficult for her.

I suggested she merely stop by another realty office she knew and re-establish a relationship with them in order to start the listing transfer. While not really sure how the whole process works, no big deal, she’ll figure it out.

Problem #2: Guidance
Now, this same student may seem like she’s got things under control and has calculated each one of her moves to ensure success, however, to be honest many of the tasks she takes on have not yielded the expected results. I believe that a little guidance would help her out a great deal.

Actually, since my student recently entered into my coaching program, she has since increased her ability to take action substantially. You know my saying, implementation is everything and money follows action. Do understand that investing in your education is never a bad expense. If you just can’t justify dropping thousands of dollars, realize there are times when you can’t afford not to have some guidance. The investment in your self should pay a return many fold its cost.

Problem #3: Lack of organization
Organizing all the leads, calls, mailings and what ever else was always a problem for her as well. She’d tried spreadsheets, notepad and paper and even a box method but it just always gets out of hand. She’s told me; to bad her husband wasn’t involved because he is an organization junkie.

She said she’s not wired that way, but she is wired to use technology. So she’s going to research some software that can enter all her leads into, keep track of mailings and any and all calls she gets as well as the properties offers are being made on. Should not be too hard to find a good software program.

So take your big pile of opportunities and break them down in to groups or just one list of twelve. Just like my student you will find taking action on the important and primary items will move you towards solid solutions very quickly.

Let me know how you create solutions. Leave a comment.

Have a good week everyone!

Mark Jackson [MJ LifeCoach]

By Mark Jackson [MJ LifeCoach]

Last time we looked at Dave Ramsey’s Baby Step 6, paying off your home early. We talked about how much freedom paying off your house would give you, allowing you to really save for retirement, give and live like no one else! Today we’ll be closing out the baby steps with a look at building wealth and giving to others. In my opinion giving to others is of the best reasons to build wealth. You always get back more than you give!

Baby Step 7: Build Wealth And Give

Baby steps 1-6 are all about getting your financial house in order, paying off debt, and then planning for the future. Step 7 looks at what Dave Ramsey likes to call the “Great Misunderstanding”. The misunderstanding, in Ramsey’s eyes, is the mistaken belief that many people hold that the way to have more, is to hold on tightly to what they have. In reality, it doesn’t work that way, generous people tend to be more prosperous. The reason? Giving to others makes you less selfish, and less selfish people have more of a tendency to do better in both relationships and in wealth building.

He gives an example to think about the concept – if you take your money, and close your fist around it, you have that money and it’s not going to get away. On the other hand, you can’t receive more money in your hand either, it’s closed up tight. When you freely give with an open hand, however, your hand is already open and is ready to receive blessings as well as give.

The idea of holding money with an open hand might seem to violate common sense. We feel that if we don’t hold on tightly to our money and our relationships, they will slip away. I’m not saying literally hold your money with an open hand – it represents our attitude toward money. When you give, you open yourself up. You allow the dollars to leave and the freedom to enter.

Giving works because it is in your personal blueprint to be a giver, and you unleash good things in your life that you will never see until you learn the art of unselfish giving. Giving lifts us out of ourselves; we take our eyes off our rights, our problems, and our stuff. The new view gives us renewed vision and hope. Giving is powerful. – Dave Ramsey

So once you’ve reached the point where you have all your debts paid, and you’re blessed enough to be building surplus wealth, do yourself a favor, and start giving to others. You’ll be surprised at how freeing and wonderful it can be! Not only will you be giving blessings to others, but you’ll be receiving blessings in return (and not always in a monetary sense).

There are men who gain from their wealth only the fear of losing it. – Antoine Riverolli
Surplus wealth is a sacred trust to be managed for the good of others. – Andrew Carnegie

Reasons Why We Should Give
When you talk about giving, there are a lot of good reasons why we should do it. Here are a few:
• As a Christian, I believe that everything is God’s, and as a result, we are only stewards of everything we have. Psalm 24:1 says “The earth is the Lord’s, and the fullness thereof”. We need to be good managers of what we’ve been given, using it for the good of others. The fact that that the money is someone else’s (God) make’s it easier to give away too, doesn’t it?
• Giving makes us less selfish people. Giving makes us more Christ-like.
• We are designed in God’s image, and because of that we are happiest when we are serving and giving. Ever notice how fulfilling it is to serve others?
• Giving can be praise and worship in which we show our gratitude to God for everything he has given us.

Get Creative About Giving!
When you’re giving, you don’t always have to wait until you’re financially secure because giving doesn’t have to be related to money. There are a lot of ways you can give of yourself and your time that are just as valuable. Here are some ways that you can give, both with money, and without!
• Help a single mother buy groceries or pay a couple of bills.
• Volunteer time at your church serving others.
• Give an extra large tip to a waiter or waitress.
• Spend time with people at a local nursing home, talking and listening to them, playing music for them or just playing games with them.
• Pay for someone’s meal behind you in line at the fast food restaurant.
• Serve meals at a local food shelf, and eat with them when you’re done serving.
• Give to a local charity.

Those are just a few ways you can help. Your own giving is only limited by your creativity. So get started!
What are some creative ways that you’ve given to others around you? How does giving make you feel? Let me know in the comments!

Mark Jackson [MJ LifeCoach]

By Mark Jackson [MJ LifeCoach]

Last time we looked at Dave Ramsey’s Baby Step 5, college funding for your children. We talked about how and when you should save for their education. Today we’ll be looking at taking extra money and paying off your home early.

Baby Step 6: Paying Off Your Home Early

After having saved for your retirement and putting money away for your children’s college expenses, the next thing Dave Ramsey suggest doing is paying extra on your mortgage, and paying off the home early.

To start with Ramsey suggests getting no more than a 15 year fixed rate mortgage, that is no more than 25% of your income. If you don’t already have a 15 year fixed mortgage, now may be a good time to refinance your home with the “Making Home Affordable Refinance Program“. A 15 year mortgage may mean higher payments, but it also means you’ll be paying the loan off earlier, and you’ll be paying less in interest. Pay it quicker that 15 years, and you’ll save even more because most of the interest is paid at the front end of the loan period.

By paying off the mortgage early you’re also going to be giving yourself a huge peace of mind knowing that your house is paid off, and if the worst happens, you’ll be able to get by on a whole lot less. After all, the house is paid for!

To pay off or not to pay is the question.

Arguments for Paying off the House
There are a lot of arguments surrounding this baby step, and whether it really is the best thing to do psychologically and financially. I know I won’t solve that debate here today, but I thought I would look at some of the points in favor and against this plan, so you can make the decision for yourself.
Points in favor of paying off the mortgage early:
• Interest Savings: You’ll be saving thousands of d0llars in interest payments on the mortgage. For example, on a 200,000 dollar mortgage over 30 years, with an interest rate of 6%, you’ll end up paying over 250,000 in interest. Cut that to a 15 year mortgage and you’re only paying 115,000 in interest.
• Less Risk: By prepaying your mortgage you’ll have less risk in your life because you’ll have a paid off house. When you have a paid off house you have a lot less to worry about because you know you’ll at least have a place to live as long as you cover the few bills you have left
• Peace of Mind: Having a paid off house means having peace of mind. I don’t think the importance of that can be underestimated. Having debt of any kind can really be an extra weight on your shoulders, and it can weigh you down.
• Less Stress: You’ll have less stress when having to deal with a job change, or wanting to have a spouse stay home to raise the children. Because you have a paid off house you’ll only have a few small bills to worry about. You’ll have walk away power – power to walk away from any job you don’t love or enjoy because you only have minimal expenses!
• It’s Like Getting A Raise: Without having to pay that large bill every month, it’s like getting an instant raise! You can take the extra money every month -and start investing!

Being debt free brings freedom, and sometimes that’s better than a few extra dollars made through investments.

Arguments Against Paying Off the House
I’ve read a lot of arguments against paying off the house on other blogs. I have to admit that many of them make a good argument against paying off the house. Some of the better ones:
• Liquidity and Flexibility: By not prepaying your mortgage and instead investing the money, you are more liquid in your holdings. Your money is more accessible if it is in investments as opposed to in a house. This can give you some flexibility if you need the extra money. Of course, having your 3-6 month fully funded emergency fund should preclude needing any large amount of money right away.
• Investing Returns Could Be Higher: If your expected returns on your investments will be higher than the interest and money saved by pre-paying, investing instead of repaying may be the better choice.
• Inflation Works With You: As inflation goes up by 3-4% annually, by not prepaying you are in essence paying less for the house every year. You pay the same in 2039 to live in your house as you are in 2009. So basically you’re getting more for your money as time goes on.
• Lack of Diversification: One could argue that paying off your house first means you’re investing in only one type of asset, and unnecessarily means more risk. Better to invest in good mutual fund where your holdings are diversified, instead of investing in only one thing, real estate.

The arguments against paying off the house first do have some merit. It really makes the decision a tougher one.

My Conclusion.
When looking at all of the arguments in favor and against paying off your house early, both sides of the debate make valid points. That makes the decision on what to do a tough one.

On the one hand, the psychological and peace of mind benefits of paying off the house early are very apparent and powerful to me. On the other hand if you look at the numbers logically, not paying off the house early really does seem to make more financial sense.

Still, it comes down to weighing the benefits, the risks and balance sheets on both sides of the equation. For me, after considering both the financial and emotional/psychological sides of the equations, I’m still coming down on the side of pre-paying the mortgage. It just seems to me to be such a powerfully motivating goal to have – a debt free life.

While I realize that some may do better financially by not paying off the house, to me it is more motivating to be living a life without debt and to have the freedom that goes along with that. The few extra dollars we might make by investing the extra money instead doesn’t matter as much to me. The answer may be different for you.

Another idea? Do a combination of the two paradigms, pay a little extra, and invest a little extra!
What do you think about paying off the house early? Do you think it’s a good idea or a bad idea? Which path are you choosing if you’re at that point? Tell us in the comments!

Next Time – Baby Step 7: Build Wealth And Give
Next time we’ll be looking at the last baby step. Baby step 7 talks about continuing to build wealth and stresses the importance of giving to others.

Mark Jackson [MJ LifeCoach]

By Mark Jackson [MJ LifeCoach]

Last time we looked at Dave Ramsey’s Baby Step 4, investing 15% of your gross income into Roth IRAs and other pre-tax retirement accounts. We looked at the magic of compounding interest, and why it’s in your best interests to start saving earlier rather than later.
Before we jump into step 5, here’s a review of the baby steps. Haven’t read the others yet? Go back by clicking the link below.

Dave Ramsey’s 7 Baby Steps
• Step 1 – $1,000 to start an Emergency Fund
• Step 2 – Pay off all debt using the Debt Snowball
• Step 3 – 3 to 6 months of expenses in savings
• Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
• Step 5 – College funding for children
• Step 6 – Pay off home early
• Step 7 – Build wealth and give!

Baby Step 5: College Funding For Children
Now that you’ve got you’re out of debt, and saving 15% towards your future retirement, it is time to start thinking about saving up for your children’s education. Remember, you don’t have to go into debt for your child to go to college. Start saving for their education once you’ve finished baby steps 1-4! Encourage them to get good grades, and help pay for their education through grants, scholarships and other free money.

Other Things Come Before Your Child’s College Fund

Here are a few good options of ways you can save for your child’s education:
• Education Savings Account (ESA): You may save $2,000 (after tax) per year, per child that grows tax free! Beneficiary must be under 18 years old. Money must be used for education purposes only. Otherwise, a 10% penalty and taxes will apply. Money must be used or rolled over to a qualifying family member by age 30 or a 10% penalty and taxes will apply. Singles with an income over $110,000 – or Married couples with an income over $220,000 are not eligible.
• 529 Plan: If you do not meet the income limits for an ESA, or if you want to save money above an ESA, you can use a certain kind of 529 plan. You can save up to $12,000 per year, per child in a 529 plan. The money must be used for higher education only. Otherwise, a 10% penalty and taxes will apply to the gains only.
• UTMA/UGMA Plans: UTMA (or UGMA) stands for Uniform Transfer (Gift) to Minors Act. According to Dave Ramsey, while this is one way to save with reduced taxes, it is not as good as the ESA or 529 plans.

Why Other Things Come Before Your Child’s College Fund
Many people will get upset at the notion of funding their children’s college fund only when they’ve reached step 5. They think that by not funding their child’s education until they have all their debt paid off or retirement funded that they’re in some way being selfish or harming their child.

In reality, I would say that you’re doing a lot more harm if you don’t do baby steps 1-4 first. Your kids can always help pay for their own schooling or get scholarships, grants or loans. But if you don’t get rid of your debt and start saving for retirement you may never be able to catch back up, and who knows if you’ll be able to rely on social security for anything in your old age. Better to get your financial house in order first, and then help where you can.

Personally I think that even if you are able to pay for your child’s schooling outright, it’s a good idea to have them participate in paying for their own schooling. They can do that either by saving up for college through after school jobs, getting good grades that lead to grants and scholarships, and by going to in-state schools that cost less. I talk more about those ideas in this post.

Here’s a funny quote from Dave Barry speaking to the idea of encouraging our children to succeed:
I believe that we parents must encourage our children to become educated so they can get into a good college that we cannot afford. – Dave Barry

How My Schooling Was Paid For
When I was growing up it was made clear to my sisters and I that my parents wouldn’t be able to pay for our college, the money just wasn’t there. Because we knew that college wasn’t going to be free, we knew we would have to work hard and go out for grants, scholarships and other financial aid. It gave us another reason to succeed.

I worked hard and I graduated. I was able to get quite a bit of my schooling paid for through grants, but the rest was paid for through my swimming scholarship, work study jobs on campus and a small student loan.

The only thing I think I would do different if I could do it again would be to save some of the money I was earning in my part time high school jobs. If I had done that I would have been able to cut short the amount of money I had to borrow, and have paid off those debts a lot sooner than I did.

Moral of this article?
• Realize and enforce the value of education even when the children are younger. Encourage them to succeed to help pay for their own schooling
• Encourage in-state schools, or for some technical schools (not everyone is going to be a doctor or a rocket scientist!)
• Help where you can by saving in an ESA or 529 plans, but don’t give a free ride!
• Realize that going to college doesn’t have to mean going into debt. Save for them, have them to save some on their own, and encourage them to succeed in school.

Next Up: Baby Step 6 – Pay Off The Home Early
Baby step 6 looks at taking extra income and putting it towards paying off your home early. Can you imagine what you could do if you didn’t have a house payment?

What’s your opinion of paying for your kid’s college? Are you saving for their college funds? Will they have to pay for part of it themselves? Let me know in the comments.

Mark Jackson [MJ LifeCoach]

By Mark Jackson [MJ LifeCoach]

Last time we looked at Dave Ramsey’s Baby Step 3, saving up 3-6 months of expenses to prepare for when you have a rainy day. Everyone will have unplanned for expenses, so it’s best to plan for it, and be ready!

Baby Step 4: Invest 15% of Household Income into Roth IRAs and Pre-Tax Retirement
To me, Baby step 4 is one of the more exciting steps in the process because it is the step where you really start to save and build wealth for our futures! You’ve finally paid off your debts (except the house) and built up your big emergency fund, and now it’s time to save for your retirement!

Dave Ramsey suggests saving 15% of your household income in good solid long term investments. No more (for now) and no less.
Why Should You Save 15%?

To give a visual demonstration of why Ramsey suggests that you save 15% for your retirement, I went to his website and used his investment calculator. I put some numbers into the calculator based on these factors:
• Making $100,000 a year
• Saving 15%
• Starting at age 30
• Saving for 30 years
• 10% return on the investments

When you put in those numbers above, it comes up with a return of well over 2.8 million dollars by the age of 60.

Now if you were to invest 10% using the same assumptions you’d end up with substantially less money, 1.5 million over 30 years, and 2.4 million over 35 years. Still not bad, but maybe not as much as you might want to have that comfortable retirement. At the 30 year point you’d have enough to withdraw 60% of your income, and at 35 years you’d have 96% of your pre-retirement income.

All of these numbers are of course assuming that you don’t have money coming from social security. I have my doubts it will last until my own retirement. That is obviously up for debate, and hopefully the system will be fixed. But why depend on it if it might not be there?

The point of all this to me is that 15% is usually going to be more than adequate to get you to where you need to be. 10% may not be, depending upon how much of your previous income you want to live on, and how much time you have until retirement. The longer you have until retirement, the bigger the gains you’ll see through compounding interest! Play it safe and start saving 15%.

You won’t be sorry!
Another caveat – if you’re older and have less time until retirement you may need to be investing a higher percentage than 15%. You started late, so you have some ground to make up! Starting earlier? You might not need to invest all of the 10%. But why not do it anyway!

Dave Ramsey doesn’t suggest investing more that 15% because the extra money will allow you to complete the next two baby steps – paying for your kids college and paying off your home early. Stay tuned for those baby steps in upcoming posts.

What Should I Invest In?
Once you’ve decided on how much you want to invest, the next step is to decide on what types of investments you should be holding. Ramsey suggests:

If you receive a company match in your 401(k), 403(b), or TSP; invest in those plans, up to the match, first. Once your contribution equals the company match, fully fund a Roth IRA for you and your spouse. If you’ve maxed out your contribution to your Roth IRA and still have money to invest, invest the rest in your 401(k), 403(b), or TSP.

In your company 401k, Roth IRA or other investment, Dave suggests allocating your investments with a good mix of mutual funds. His preferred plan is to allocate 25% to each of the following types of stocks in your funds:
• Growth
• Growth & Income
• Aggressive Growth
• International

What do you think about this baby step? Will 15% be enough for your retirement? Do you think you should save more or less?
Leave a comment with your own thoughts. I’d like to hear from you.

Mark Jackson [MJ LifeCoach]