Thursday, December 29, 2011

Stop Lying about Money (To Yourself)

If you have been reading this blog for any amount of time you already know that I am a big fan of setting goals and resolutions (it turns out that a lot of successful people do it too). With the end of the year approaching, what a better time than now to start making some 2012 resolutions? Here, I’ll start you off with a suggestion!

Stop lying to yourself about money.

Yep, I said it. You lie about money…a lot. Wanna know how I know?

1. You create ridiculously unrealistic budgets.

2. You think bad (and expensive) stuff won’t happen to you.

3. You project (to yourself) that you make more than you do.

4. You spend money before you have it.

5. You use a credit card to get “rewards”.

6. You took out a 30 year mortgage and are “going pay it like a 15 year”.

7. You lease a car because it is a “good deal” and a small business “tax write off”.

8. You deserve a $5000 vacation.

<Deep Breath>

Sorry, I got on a little soap box there for a minute.

Here is the deal, I often write about things that I am thinking about for me personally. So if you felt like I just hit on something you do - it turns out, so do I on occasion. Actually, I think I can say with some certainty that we all do it from time to time.

So let’s make a resolution in 2012 when I think about money I am going to be honest with myself. When I make a money mistake, I am going to admit that it was an error and I am going to avoid it in the future. I vow to be an armed consumer who doesn’t fall for gimmicks and most of all… I am going to stop making excuses and start creating results.

Wednesday, December 21, 2011

Financial Tech Podcast #11: Big Bonus and Kindle Fire


So you got a year-end bonus… now what?

End of the year boosts are nice on multiple fronts but the variable income, if not planned for, can slip right between your fingers if you are not careful!

Here are a couple of great options for putting that money to good use:

  • Spend the bonus on paper first for 1 time bonuses
  • Pay down debt
  • Get rid of credit card and charge card debt
  • Make an extra payment on your mortgage
  • Save
  • Emergencies
  • Major Purchases
  • Wealth Building
  • On-going variable income
  • How much can you count on?
  • Make a budget based on your base income
  • Live within those parameters
  • Have a plan for variable income

Andrew recently ordered a set of Kindle Fire tablets for business use. He and Jim spend some time talking about using this consumer device for business purposes.

Thursday, December 15, 2011

How to Accumulate Wealth

It’s that time of year again – time to think about what went right this past year and what you would like to try again next year. Some of us will likely be thinking about improving our health by exercising more or eating better. Others will likely be thinking about ways to improve their finanmoney in the handscial position in the year to come. Maybe that is paying down debt, trying to save more, or simply just implementing a budget for the new year!
I often think about things in a process format, it makes things easier for me to comprehend so I thought I would share with you a process for accumulating wealth.
Step 1: Start Right Now!
All of my students should be able to tell you about the first step in the process – they all know that the driving factor in accumulating wealth is time!
I would love to break down the compound interest formula and show you mathematically why time is the key factor and if you come to one of my classes you will likely see that happen! But for now just take my word for it; the sooner you start, the more you can accumulate!
Step 2: Have a Goal!
I like having goals, they are a great way to track your progress! I suggest using a percentage savings goal. A great idea is to save 16.66% of your gross income each year for wealth building. I know that is a big number so start small, with something affordable and increase your saving percentage each year by 1-2%.
Step 3: Make it Automatic
I often hear stories about people setting up a contribution to their retirement account and then going in and changing it all the time according to their income needs. That’s a bad idea. Most of us do not have enough discipline to be able to set aside money on our own… we have to build fake discipline. The best way I have found to do that is through automatic deposits. I literally treat my saving like a bill that comes out automatically each month. Once I pay it, I forget about it. And just like a bill I cannot change how much I owe (myself), I am required to pay the obligation – because if I don’t, no one else is going to do it. Just set it up and then do not touch it!
Step 4: Find a Jet Engine
Most of wealth building is accomplished through great habits but there is also an element of risk and good fortune. A key piece of investing is the idea of risk versus reward. In order to be paid you have to take risks, the more you want to earn the more risk you have to take! An essential part of reaching your wealth goals includes the need for a high octane investment that will propel your portfolio to success. This could be a personal business venture, an investment in some sort of security, or even an investment in yourself – whatever it is you have to capitalize on those opportunities!
Step 5: Leave it alone
Find a strategy, implement the strategy, and let it run its course.
Have you ever tried to make a great omelet? As you practice the art of omelet creation, you will find that a key mistake people make is that after they crack the egg they don’t let it sit long enough before adding their filling (also people often overfill the omelet which is a mistake as well). You have to let the egg set up and run it’s course!
Too often people start meddling with their strategy too quickly! Either they aren’t performing how they hopped or they are out performing and want to try to do more.
Give it some time! Rome wasn’t built in a day! Things that come quickly are quickly lost!
Step 6: Keep Doing it
No matter what, press on. The only person responsible for your financial future is you. All you can rely on is that there are no excuses, just results.

If you like this post check out my weekly video commentary at:

Wednesday, December 7, 2011

Should I Pay Down Debt or Save?

What a great question! Honestly, this is one of the most common questions we get at the credit union.

**Disclaimer: this is an inherently individual question. Every family is in a different situation with different variables. This post is a generalization in every sense!** Smile

Here is our advice, If you are trying to decide what to do with some money; one of the best options is to pay down debt. By reducing outstanding balances you are saving money on interest cost, you gain some peace of mind, and you improve your net worth. However, as we all know, life happens! If all of your excess money is being applied toward debt payment and you have no emergency fund then if an issue comes up you will be forced to take on new debt.

To illustrate the process I decided to put together a decision tree for you: Picture2

So as you can tell the question really comes do to can you pay off the debt in 18 months or less. If the answer is yes – then go for it! If the answer is no, you might have to do some more saving along side your debt reduction.

The reason for this is simple. You cannot afford to put saving on hold for more than 18 months. It is essential to keep your intensity up and get rid of that consumer debt but you also have to establish a strong cushion.

Friday, November 18, 2011

Do You Pay Santa Claus With A Credit Card?


I am not going to lie, I used to be a bit of a Scrooge when it came to Christmas. Then I got married, and those of you who know my wife… well let’s just say we have had our decorations up for nearly three weeks now. So shortly after we got hitched and I was acting like old Ebenezer, Liz made it pretty clear to me that my Grinch attitude was not going to fly – I needed to do something about it.

I found myself evaluating why I had such a bad attitude about Christmas. As you can probably guess, it was not the holiday that turned me into a Grinch, it was the bills! I know many of you can probably relate and as the Holiday season is approaching I thought I would pass out a few pointers!

1.) Save throughout the year! It turns out that Christmas is every year on December 25th (shocker, I know). Try saving $25 every paycheck, I bet you wouldn’t even notice that amount missing. There are about 26 paychecks in a year so you could have $650 for Christmas!

Ok, well what if you didn’t save all year. Step 1: Start THIS year. Step 2: Try some of these options:

2.) Get back to the reason for the season with a homemade/no-gift holiday celebration. With so many families struggling these days, I think everyone could benefit from stepping back and remembering what is truly important.

3.) Pay cash, you still have a few weeks to save. Go out and only buy the gifts that you can pay cash for. This may be a little stressful up-front but when the day arrives and there is no credit card bill there will be significantly less stress.

4.) Consider implementing a cost limit on your gift giving. Maybe this year your gifts do not exceed $20 in cost!

Do you have other ideas that I didn’t mention here? What are you and your family doing this year? Leave a comment!

Friday, November 11, 2011


Today’s article is a guest post from Professor George Morgan.

WallstI became aware of the stock market 45 years ago. But, the market that I was introduced to was a very different market than the one we have today. The market I meet was a physical place that was run by people who stood on the floor of a huge building and took orders over the phone and then completed those trades by hand. News came from a ticket tape, the morning newspaper and land lines. It was a market that sometimes turned emotional. At other times it moved at a snail’s pace, when it moved at all. But, the majority of the time it displayed a sense of rationality and order.

Today’s market is an entirely different animal. Today the market has replaced humans with computers that decide when to buy and when to sell. Then the computers complete the transactions among themselves. It no longer has a geographical center, but rather it spans the globe. Stocks that were once only traded on the New York Stock Exchange can be bought and sold almost anywhere in the world. Trades and information move at the speed of light. The market that I met was dominated by the actions of the individual investors. Today’s market is dominated by institutions and the individual investor must learn to accept this and adjust accordingly. Currently, volatility is the general order of the day with rationality and order taking a distant back seat.

Jack Walsh, the iconic ex CEO of General Electric is fond of saying, “Change before you have to.” It is critical for investors to appreciate the fact that not only will the market continue to change, but like the rest of our world, the pace of the change will accelerate. Investors need to be prepared to adjust their thinking and seek out solutions to an environment where constant change is the only thing not changing.

Professor Morgan completed his undergraduate work at San Diego State University and his graduate work at Purdue University. He has held faculty appointments at Purdue University and Ball State University. He has 30 years’ experience as a Financial Advisor with two local brokerage firms. He currently holds a position as Adjunct Professor of Finance at the University of Nebraska, Omaha. Learn more or contact Professor Morgan at: George Morgan - LinkedIn

Monday, November 7, 2011

Financial Tech Podcast 10: Values and Money


Where we spend our money is a reflection of our interests, values and priorities.

Does your bank statement reflect what you value?

If a stranger were to look at your last monthly statement what would they assume you love to do?

So how do I get my bank statement to reflect what I value?

· Conduct a self audit

  • Where is your money going
  • Is that where you want it to go?

· Establish your true values

  • Spend on what you love
  • Cut out the things you don’t love
  • You can’t love everything!

· Then re-evaluate

Use to help you set alerts for your spending.

Try using to electronically simulate the cash method of budgeting!

Friday, October 28, 2011

The Wealthy State of Mind

untitledOne of my most important roles as an advisor is to be a teacher. Teaching has really become a passion of mine over the last few years and we now facilitate workshops or teach classes for the public on a regular basis. I honestly believe that teaching is one of the most difficult professions that anyone can pursue. Not only do you have to know the subject material but you also have to understand why and be able to explain it in approachable terms. In other words, you have to know why you know!

When I teach personal finance classes, I am often reminded about simple things that I learned through experiences which changed the lenses that I look through life with. Whenever possible I try to share those experiences with my students. One of my latest lessons is about understanding what it means to be wealthy.

Dr. Thomas Stanley is the author of many popular books such as The Millionaire Next Door, The Millionaire Mind, and Stop Acting Rich. Dr. Stanley has studied wealthy families for many years and greatly impacted my thinking of how I define wealth.

It is important to note the true wealth is not just about monetary assets or income. There are many factors that play into living a rich lifestyle such as relationships, career satisfaction, faith, and physical health. However, for this article I am simply addressing monetary wealth.

Dr. Stanley refers to two types of wealthy people: the income statement affluent, and the balance sheet affluent. The income statement affluent refers to those with large incomes but not many assets to show for it. We all know the type, that friend who has the big salary but also has the big spending habit. By any income definition he is rich but he does not retain much of his wealth.

The balance sheet affluent person may have a modest income or may have a large income. Either way, they are marked by being excellent accumulators of assets. Those assets could be retirement accounts, real estate, business ownership, or marketable securities. We all probably also know someone that fits this profile as well. We might describe them as “being good with money” or as someone who has “made good financial choices”.

These are fundamentally different people; their attitude toward money could not be more opposite. The balance sheet affluent person tends to see money as a tool that they use to achieve goals that align with their values. The income statement affluent person tends to see money as a reward and as such uses it to sustain a lifestyle that reflects winning. Income statements affluent tend to keep score with purchases and balance statement affluent tend to keep score with accumulation.

Clearly the balance sheet affluent are creators of wealth. I think the question that needs to be answered is how do we go about becoming a balance sheet-type person? I think it all beings with establishing values.

If you were to complete the simple task of examining and categorizing your last bank statement I think you would uncover some interesting information. I would challenge you to ask yourself a few questions.

1. If a random stranger were to look at your bank statement, what would they assume about your values based on your spending habits?

2. Does your bank statement reflect what you feel like you value?

3. Where should you make changes in your spending habits to more accurately reflect your values?

For more on this values idea, feel free to read the article on page one.

So what is the bottom line? Well in my opinion, if you want to become balance sheet affluent and a creator of wealth, you must value saving. Your attitude regarding the purpose of money has to shift toward viewing it as a tool. That tool is used to create rather than consume. So in turn you must also learn to keep score through accumulation rather than purchases!

Thursday, October 20, 2011

How can Gallup FCU be Convenient Outside of the Omaha Metro?

We realize that many of our members do not live in the Omaha Metro area. Well a while back we decided to band together with other credit unions to better serve our members. By using our network of “Shared Branches” around the country you can now access your account in your local community.

So you are probably asking, “How do I access these convenient locations!?” You simply have to go to our locator!!


Once you find a location near you, all you have to do is go to the credit union, walk up (or drive up) to the teller line, present your photo identification and your account number!

It’s really that simple and there are more than 4,400 locations around the country.

Friday, October 14, 2011

Change Your Family Tree, from

This is a great post from Dave Ramsey’s blog today, I thought I would share it with you!

Have you stopped lately to think about the legacy you’re passing on to future family generations—your family tree?

“Changing your family tree” can mean different things to each family, but the core goal remains constant: make things better for those who come after you.

Here are some of the ways that Dave fans are changing their family tree by taking baby steps each day.

Jill Walles is establishing a new “normal” in her home. “I know our children will make financial mistakes, but they will have been raised in a way that rejects the cultural ‘norm.’ They already earn money, save for things they want, and give at church—some seriously important lessons already learned!”

I'm changing the fact that just because my children were raised in a single parent household, they were not raised in poverty,” Robyn Fishers said. “My teenagers are being taught that when things get tough, you get to work and do not rely on debt. I have made them a part of this fight out of debt so they will realize it is not a fun trip. We have all learned so much in the past eight months since I went thru Financial Peace University. This is a 180-degree change from what I was raised with!”

Dave says that when broke people start acting like what you’re doing is weird, you’re probably on the right track! That’s what’s happening for Susan Haines’ family.

“We don't always have everything we want, but we have stopped using credit cards all together. Our parents use them for anything, at any time, and are always stressed out about having no money,” she said.

Lessons Worth Living

Charlotte Little says she is raising her kids to know that everything doesn’t come with a payment. “You can get what you want but you have to save up and buy in cash,” she wrote. “Debt takes too much away from families, so I want to teach my boys that being debt free is the way to be.”

“I’m changing my family tree by teaching my kids how to work for their money and not wait for it to be handed to them. I’m giving them responsibilities instead of doing it for them, and rewarding them according to their work,” said Cyndi Fifield.

“My children have sworn they will never get credit cards so they won't be burdened with massive debt,” said Tammy Dorrycott. “My older daughter spent hours every night applying for scholarships before she went to college last fall so that her college is paid for.”

A Legacy of Freedom

There is nothing better you can do for your kids than owning your situation and getting in control so that you don’t become a burden to them someday!

“The biggest thing is taking responsibility for myself,” said Sill Reico. “By changing my family tree, I'm praying my kids won't have to be responsible for me when I get older (as I am with my parents). I love them to pieces and would do anything for them, but sometimes it's difficult to carry my life and theirs. They did the best they could. They didn't know any better. But thanks to FPU, I do.”

“I used to think that to change my family's financial future meant to have a little money to leave them. At this late stage in life, we don't have that much yet,” said Karen Newton. “But what we do have are lives transformed debt freedom. Our family tree has been changed forever, and our marriage is set on a firm footing. That is a legacy far more lasting.

Remember, if you don’t like where things are heading, you hold the power to change it! You can set the example. You can make decisions and create habits that will forever change your family’s future! Get started now with Dave's life-changing class, Financial Peace University.

Friday, September 30, 2011

Welcome to a New Era: Debit Card Fees

You may have heard the news, Bank of America is going to start charging $60 per year to use a debit card next year. Yep you read that right, to creditcardssimply access your own money with the swipe of a card you will have to pay $5 per month. I know what your thinking, “well that’s just because it’s BoA”. The cold hard truth is that both Wells Fargo and Chase are also going to start charging a monthly fee of $3 next year as well.

So is the era of absolutely free checking going the way of the Dodo Bird? Well if you bank at one of the institutions that is announcing a new fee, I guess the answer is yes.

The good news is that Gallup Federal Credit Union does not carry any fees for our checking accounts – and we are not going to implement any in the future. In fact, many of our friendly credit union friends are going to keep their checking accounts free as well.

See guys, it’s really pretty simple, when we publish a mission statement we stick to it:

“Not for profit, not for charity, but for service”

Since our members are also our owners we don’t have to charge big fees to meet stockholders demands and keep up with analyst estimates. We do have to provide great service; because when you walk up to our teller line you’re not just a customer – You are the Owner.

Thursday, September 22, 2011

The Legendary Committee Meeting

Budget meetingPutting together a budget is one thing, sticking with it is another story entirely – especially if you have a dual spending household. With so many transactions taking place it can really feel like there is too much going on to control it all. To add more confusion to the mix, surprises outside of the plan seem to happen nearly every week! Before you know it your good intentions of keeping on top of your budget have fallen to the wayside and you go back to fly’n by the seat of your pants.

So how can you set a budget and actually stick to it!?

At our house we call it the “Budget Committee” (picked up from Dave Ramsey), it’s also known as the “Weekly Follow Up Squad”, or the “Spending Update Brigade”. What ever you call it at your house, it is definitely essential to the success of your plan!

Life happens guys! Your dog is going to get sick and your kids are going to have random school expenses – the only certain things in life are change, taxes, and mortality. So you have to update and adapt. That’s right, I said it… adapt. Most of you who know me, know that adaptable is probably the last word that would ever describe me. But even I have come to realize that a budget has to adapt, SO YOU CAN DO IT TOO!!!

I suggest getting together for a few minutes every weekend to re-connect and talk about what has happened in your financial world over the last week. Did a surprise come up? Extra spending needs? Extra Income? How are you going to adapt your budget to make sure that every dollar is accounted for and that every cent has a place on paper.

You have to be intentional guys, you can either manhandle your money or you can let your money manhandle you! Remember at the end of the day your budget is simply a plan that allows you to spend extravagantly on the things you value and cut away the things you don’t really care about. 

Plan your Budget Committee Meeting for Saturday morning and enjoy some time with your financial partner over a cup of coffee and a beautiful sunrise. Go for it!

Monday, August 29, 2011

Financial Tech Pod Cast #9: Tips for a Wild Market


Most of us are involved with the securities markets on some level, for most of us it is simply within a 401(k).

So how can we reconcile the extreme swings in the market with our own personal savings goals?

Ask yourself a few questions:

· How long is my time horizon

· How long can I stomach a depressed portfolio balance

· Can I afford to buy more

So what’s going on? Why is the market so volatile?

So as a 401(k) participant what can you do?

· Revisit your investment allocation

· Evaluate your objectives

· Measure your risk tolerance

· Get professional advise

Thursday, August 25, 2011

How to Spend Extravagantly on the Things You Love

Money is a pretty revealing thing. When you sit down and take a look at the comings and goings of the funds in your checking account you can learn quite a bit about what you value.

Your spending habits don’t lie. When you look at where you spend your resources, the truth is, that you chose to spend there over somewhere else. It’s not good or bad; it just is what it is. It might be subliminal, but I suspect that we often think we were forced to spend money on things. But in fact, it is a conscious choice every time we pull the debit card out. The strange thing this is that even though we each have a choice, when we preform a self audit on our checking account, what the numbers say we value may not be in fact what we want to value.

So how can I make my bank statement reflect what I value?

Guys, I don’t know about you but I love to be in control of my finances. I feel empowered when I have the ability to make my money work for me instead of me for my money. The honest truth is that sometimes that’s not the case. Sometimes when I look at my bank statement I spent money on things that I honestly do not care about… but you couldn’t tell by just looking at the numbers. 

I have had to change the way I think about taking control. Obviously I have to spend on the essentials. I have to keep a roof over my head, I have to eat, I need transportation to get to work, etc. But after those basics, I have some choices and I want those choices to reflect what I value. Some people might value gym memberships, others might value fine dining, it really could be anything. The point is that everyone has different loves and most people don’t love everything. So spend lavishly on the things you care about and then cut out the things you don’t care about with intensity.

Make your bank statement a reflection of what you love to do. Take control of your finances and make your money work for you.

Friday, August 12, 2011

20 Bucks, Pocket Lint, and a Big Smile

Have you ever found a forgotten 20 dollar bill in your winter coat pocket? How about 5 bucks in your gym bag from several months back? I don’t know about you but this rarely happens to me. However, I can think back to one of the few times it did happen and it makes me smile. Seriously! I am smiling right now while I write this.

It feels like found money!

I like that feeling so much that I have started the practice of creating my own “found money”. I am sure you have heard me talk about one of the best financial decisions I have ever made – the Christmas club account. I think I love this account so much because it feels like found money. I do a simple payroll deduction every two weeks. It’s not big money, only about $40 per pay check, and to be honest I don’t even notice it. But when Christmas rolls around we suddenly have all of the presents covered and even have some funds left over for our travel expenses!

It’s like a pre-paid holiday – I am smiling again just thinking about it!

Here is the deal guys, you can create found money situations all around you. How about a short list of some ideas that you can win at and smile about:

  • Retirement saving
  • Christmas expenses (including travel)
  • Vacations
  • Gifts
  • Insurance premiums
  • Vehicle registration
  • Home repairs
  • Back to school expenses

As you can see the possibilities are endless! I know some of you are already doing this, what are some of the expenses you set aside for? Please share!

You know what else makes me smile? A picture of my puppy (see below)

Koki Bear

Friday, August 5, 2011

Podcast #8: Keeping up with the Jones’


Keeping up with Jones’… Are you sure that’s what you want?

Check out this great article:

Why do we find the need to compare ourselves to our neighbors?

  • · A big part of our culture is based on competition
  • · We have an inherent need to further ourselves
  • · If you are not careful it feeds the “rat race” and leads to a dissatisfied life

We tend to overestimate other people’s financial positions

  • · We exaggerate there income
  • · We minimize their spending habits
  • · We assume they are better than we are

What is the secret to finding satisfaction within your means?

  • · Become a realist
  • · Start a conversation with your family, or if you are brave, with your friends
  • · Set some goals
  • · Save first, then spend.

Check out some of the statistics you can find on on-line communities like, but remember you don’t want to be average! Consider checking out some of my favorite blogs such as:  – Great book called “Stop Acting Rich: And Start Living like a Real Millionaire”

Friday, July 29, 2011

It’s Like Beating Your Head Against a Wall–Consumer Debt

A while back I wrote about building a strong financial pyramid. One of the core pieces to the base of the pyramid is getting rid of consumer debt. I thought I would take a few moments to talk about why this is such a critical piece on your journey to financial freedom.

So what is consumer debt?Money in Hand

  • Credit Cards
  • Charge Cards
  • Student Loans
  • Auto Loans
  • Personal Loans
  • Lines of credit

Seems pretty straight forward, right? Consumer debt is really any extension of credit that you used to purchase stuff or support your lifestyle, with the exception of mortgages.

For some reason, in the United States it is considered  pretty normal to use credit to get the things we want today without paying until tomorrow. It has really become part of our culture to just accept credit card debt and auto loans. I hear someone say that they “will have a car loan forever” at least once a week!  WHY!?!?!

Here is the deal guys, consumer debt is holding you back from achieving your goals. Those credit card payments are literally keeping you from being able to spend your resources on the things you want to be doing! By paying off your debt you will have the freedom to spend lavishly on the things you care about and cut relentlessly on the things you aren’t interested in.

Think of it this way, if you are spending $300 dollars a month on a car loan, $100 on credit card minimums, $250 on student loans and another $60 on your in-store charge card, how much are you sending out each month? $710, I don’t know about you… but that’s big money to me each month! Think about all the stuff you would rather do with that money!

This truly isn’t rocket science. In fact I am willing to bet that some of you are reading this and thinking:

NO DUH Andrew!!!

I know, right!? This is basic, but just because it is basic doesn’t mean it is easy! We have been engrained to accept the yoke of debt. You have to break that mentality and free yourself from consumer debt today. No excuses, just results.

Tuesday, July 12, 2011

Where Sophistication Meets Education

I have heard it said before that the only way to separate yourself as an advisor is by building a strong brand and providing good service. There might be some truth to that concept since personal service has become increasingly rare; but I would also contend that there is a third and more important quality – being a teacher.

money-on-the-brainIf there is one thing that the financial community is really good at, it’s making topics confusing and unapproachable. Some things are naturally complicated and potentially difficult to understand, but not all topics have to be complicated! In fact, I tell my clients that they should only invest in products they understand. That might seem a little absolute and conservative but I think the results are powerful.

When you understand how something works you can see all sides of the transaction. You can evaluate the risks and adequately compare those to the potential rewards. Making an informed decision boils down to being able to think critically about the potential outcomes of your actions. I say use the "Could I explain this to my mother" rule!

Investors run into trouble when they get talked into investing in a "sophisticated" product that they don't understand. The investor might feel like they understand the product right after a sales consultation. However, I advise that instead of buying right away; they sleep on it and then try to explain the investment to their mother the next day. If you cannot describe what you are about to buy... some red flags should be going up. Unfortunately, in too many scenarios the investor does not take this advice and the end result is an unhappy client and a sales guy who got a nice big commission. This is especially important with retirement assets! When it really comes down to it, the best solution is to find an advisor that is a teacher and not a salesperson - A teacher will help you answer yes to the "Could I explain this to my mother?" rule!

You see guys, being a successful investor is not about how sophisticated you are. It’s not about keeping up with your brother-in-law, buying oil and gas contracts, or implementing option overlay strategies. Being a successful investor is about earning returns while taking acceptable risk. You are the one who decides how much risk is acceptable – not your brother-in-law.

The most important role of an advisor is to help you identify your risk tolerance and help teach you where the risk lies in your portfolio.

I tell people all the time that investing is not rocket science. You can do it! The trick is finding the right person to help you along your path. You should leave a meeting with your advisor feeling like you have a deeper understanding of your financial position. That could include investments but it’s not limited to just that. You could also be learning about managing your debt load, insurance, taxes, estate planning or any other topic surrounding your financial wellbeing!

Thursday, June 30, 2011

Podcast #7 All About Insurance


Insurance is often discussed as something that is complicated and difficult to understand… Let’s fix that!

Remember what insurance is for: Risk Transfer!

When you think about the things you could insure, several things might come to mind: Home, auto, life, and personal property. There are different types of risk associated with each of these.

Some risk you might want to:

· Retain (the risk is infrequent in occurrence and minimal in scope)

· Avoid (the risk is frequent in occurrence and the significant in scope) – ex. lifestyle choices such as smoking that leads to premature death

· Transfer ( the risk is infrequent in occurrence but significant in scope) – ex. Death of a loved one.

When you buy insurance you are transferring the risk to the insurance company!

When you buy insurance remember the risk you are trying to transfer and the dollar value of that risk

· Your annual premiums should be less than the risk value for it to make sense!

· It has to be an actual risk for you to want to transfer it.

What are the most important insurance policies that most people should have?

· Term Life Insurance

· Long term disability – much more likely to be disabled than to die

· Homeowners/Renters Insurance

· Auto Insurance – it’s the law

· Health Insurance – it will be the law

· Personal Umbrella Policy

Andrew recommends websites like for life and disability and for Auto and Property.

Jim’s Twitter:!/jcollison

Andrew’s Twitter:!/AndrewDHunt

Contact the show at

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Intro and Exit Music from “Motion” by Adelaide. Hear more great tunes at

Friday, June 24, 2011

I Should be Saving How Much?! by John D Buerger, CFP®

How much of your income should you be saving?
A common rule of thumb answer used to be that 10 percent of income should go into savings.
"But 10 percent of income is a lot!" is a common response. Saving that kind of money seems so daunting that most people don't even try, which is why the national savings rate ended up actually being negative in the mid-2000's. Today, consumers are spending less and saving more, but the national savings rate is still in the low single digits - well below the 8 to 10 percent rate in the 50's and 60's.
10 Percent Is Not Enough
Here's the real kicker: based on recently published research, the average savings rate really should be 16 to 20 percent of household income... not 10 percent.
Sixteen to 20 percent?! Ouch!
If 10 percent was so difficult that most Americans didn't even try, how likely is it that you will take a shot at 20 percent savings? It's almost too depressing to think about.
coinsMission Impossible
Hang with me for a few more minutes, though, and let's see if we can make a dent in this seemingly impossible 20 percent savings target.
As a Certified Financial Planner™, I've reviewed lots of client cases over the years. Since I believe true wealth is built out of cash flow management (not investment management), I have paid closest attention to the successes and failures of various savings strategies.
Here is what works:
Step #1: Trim the Fat

Almost everybody can identify 5 percent in cash flow savings just by paying attention to expense details. Use an online budget planner to chronicle every dollar that you spend.
When you see an expense you don't recognize or is surprising, you will have found an easy place to trim your expenses. Spending your money on that item obviously didn't register as much of an experience. Otherwise, you would have remembered it.
Step #2: Understand Value

Take a moment to think about the most important things in life to you. These are your values. For most people, top tier values include relationships, family and special experiences. They almost never include “stuff” (i.e. tangible items). Humans are hard-wired to be attracted to shiny new things, but that attraction doesn't last and the item is soon forgotten.
Here's an example: remember the new shirt you "had to have" back in 2002? Me neither. Same thing goes for most restaurant meals - they just aren't that special to remember.
In the grand scheme of things, the phrase, "He who dies with the most toys wins," is rarely what's going through the mind of a person on their death bed.
Step #3: Pay for Value
Every time you are faced with a spending decision, take a short pause to ask yourself, "Is having this really important to me? How important is it?"
Compare your answers to how important having something different that you would really treasure would be in your life. Understand that every dollar you spend on one thing is a dollar that cannot be spent on something else that you might value more.
Step #4: Shift Your Framework
The last trick is to change the perspective with which you view each purchase decision. Our tendency is to view expenses in comparison to our annual personal income: "I make $40,000 a year. This is a $20 purchase. Twenty bucks is nothing compared to $40,000, so the cost is insignificant." Or, "The cost is zero and I want it."
When your brain does the cost-benefit analysis - you end up making the purchase.
But what if you compared that $20 purchase decision to the money you REALLY have control over. For most people that "control income" ends up being $100-150 per week for everything including food, clothing expenses and entertainment - truly discretionary expenses. The rest of the money you spend each week is to pay taxes or fulfill previous obligations like rent or mortgage, utilities, loan payments and gas for your car.
Now that the $20 decision IS significant (compared to $100 you have to spend all week), you might be tempted to think twice about dropping the cash.
You Can Do This

Implementing each of these four steps can easily trim 10 to 15 percent of your current expenses without giving up anything that is really important to you. You're just spending less money on the stuff that doesn't matter anyway.
I have seen many cases where clients have actually been able to exceed the 20 percent savings rate target and in every case they have said they have never been happier.

Thursday, June 9, 2011

The A/C Always Breaks When it’s Hot Outside

I am in New Jersey right now and it is pretty warm, about 95 degrees today!AC And earlier this week in Nebraska it hit the triple digits for the first time of the summer season. So what happens when it gets hot? Of course, the air conditioner breaks!

It seems to be the natural order of things. When the weather changes and you start turning on appliances that you have not used for several months, they never work properly. The air conditioner has a hard time in the summer, the furnace has a hard time in the winter and the car has a hard time every time the seasons change!

If you have heard me speak in the past or read this blog for any amount of time; you know I am a huge fan of  having  an emergency fund. In fact, I am such a big fan that I think an emergency fund is the single most important thing you can do to improve your financial wellbeing. So when the appliance breaks down, some of you who have an emergency fund might initially reach to that account to cover the cost. But is it really an emergency? Well, I think that is a question worth considering!

Here’s the deal… I would argue that events which occur with some sort of frequency and certainty are not emergencies. Case in point: Christmas. Some people might like to argue that Christmas sneaks up on them every year and forces them to incur credit card debt. It happens every year people! You can plan for that, it’s not an emergency.

If there another thing I know for certain it is that cars simply exist to get us from point A to point B and break down all along the way - which in turn sucks money straight from our wallets.

There is a certain level of certainty that if you live in the Midwest you will have to make car repairs and eventually purchase a different vehicle.

So things that have frequency and certainty should be saved for in my humble opinion. However, you have to decide what qualifies as an emergency for your family. I would actually encourage you to literally make a list of the things that are emergencies to you. There is something psychological about physically writing things down. I think it forces you to actually commit to it – after all you wrote it down!

So what about the random home appliances, decks, siding, windows, etc.? I would suggest saving for those costs since we know they are going to happen! A few months ago I wrote about a little rule of thumb that I would like to bring back to the forefront of your memory. If you own a home you should consider saving 1.5% of the value of your home each year. Then simply earmark this account for up-keep expenses. As you might remember, I am a new homeowner and I’ll tell you that so far in the first 6 months I have had to call both a plumber and and an A/C repair man. That 1.5% savings account is coming in handy!

Tuesday, May 24, 2011

Podcast #6 Tips and Tricks for Students and Parents When Paying for College


Jim and Andrew are together again for next installment of the Financial Tech Podcast!  Jim just had a child graduate from high school – for many people this means college is next.  So how do you pay for it?

We have blogged about this back in February so check that out.

Andrew quizzes Jim who is going through it right now.
What has has experience been?  How was the big bad FAFSA – done online  Were you able to find aid for all of the cost of Government loans, Grants, Scholarships, Private loans and out of pocket fundsFAFSA: Free Application for Federal Student Aid

What was the process like for Jim? Did he encourage his kids to work through school, did he try and cover most expenses, or did he lay the whole responsibility on the student? Remember there is no wrong answer

When you graduate, what are the steps to start paying them back?  Contact your servicer!

Create a list of all the loans you have out there include: Lender, Servicer, Address, Payoff amount, and interest rate find this at National student loan data system. 

Look into consolidating with the Federal Direct program  Do the math, what makes sense for you.

New great website:

Thursday, May 12, 2011

The Cattle to Back Up the Big Hat

We all know the type; a big house, luxury cars, a sports boat, and all of the other trappings that come along with “living the dream”. If you are anything like me, the first question I wonder to myself is, what do you do that you can afford all of this stuff? The upkeep alone must cost a fortune! There is also a good follow up question that I have starting wondering as well: How much did you have to borrow to acquire all that stuff!?

Tom Stanley, author of the book The Millionaire Next Door, has a great expression for those folks out there who have nice stuff with a bunch of debt attached to it. He says: they have a “big hat and no cattle”. In the ranching world the traditional display of success is wearing a nice big cowboy hat. But as we all know if you wear a big hat and don’t actually have the “success”, in this case a significant amount of cattle, you are simply a faker.

10 gallon hatI know it sounds harsh, but I think you guys can handle it. Let’s call it what it is. If you are creating a false reality; you are a faker. I would even go so far to say that we all do it to some extent. Whether it is with material possessions or relationships, every once in a while we fake it.

I have had the opportunity to work with many individuals in our business, and I have seen the best of the best faking it with their finances. They tend to round their total debt down and income up. These folks spend generously, borrow quickly, and live for the next paycheck so they can cover their minimum credit card payments. If you look in from the outside, it looks like they have all their ducks in a row. They are living an ideal life and wear a “Big Hat”. In reality, when you dig into their financial situation they are treading water and the waves are getting higher and higher. It doesn’t matter how much money they make, it could be $40,000 or $250,000. You can fake it at any level.

I don’t know about you, but I want to have the cattle to back up the big hat.

So how can we stop faking it? I think the first step is to try to identify the areas where we are faking. Do you pick and choose the debt you are including in your mental total? Do you leave out that mortgage debt or those student loans? Do you tend to round up when you think about your salary? What about those leased cars - are you including them in your assets?

It can be a painful exercise but when you wipe away the fog of faking it, reality can push you to action. The next step is to start changing. Try selling some stuff, pay down debt, or put together a budget that you can stick to. Be honest, don’t fake it anymore!

Monday, May 2, 2011

Podcast #5: Listener Questions and Answers!



Andrew Hunt and Jim Collison are back for another episode of the Financial Tech Podcast.  Andrew updates us on what is currently keeping him busy.  We also spend some time discussing the benefits of using as well as answer some questions submitted by you, the listener.

To submit your questions, email

Comments submitted by a listener.

“One of the things I see all the time is when  a new management employee signs up for the stock program, they almost always start at the maximum payroll deduction we allow of 10%.  Then a few months later, sometimes even sooner, they drop out of the program and sell out the balance in their account.  In comparison, the few that sign up for smaller amounts, say 5%, tend to stay in the program longer and actually build up a decent balance.”

“I have run into many employees who when I show them how much they need to save to reach their goal, say that is too much and therefore they will not save anything.  Of course that makes no sense at all, but the moral of the story is to start saving with the maximum you can afford and then increase it over time.”

“If your employer has any kind of matching, like we do, you should make sure you are investing enough at work to max out this matching.”

“You guys mentioned Mint.  I have never used that, but as a long time Quicken user (from the DOS days), is Mint something I should consider and why?”

Other questions that have been submitted:

What is the best/most effective way to pay off a credit card?

What are your thoughts on loan consolidation? How does it work?

What is the best way to start investing? Can you explain what a 401(k) is and how It works

Intro and Exit Music from “Motion” by Adelaide.  Hear more great tunes at

Thursday, April 21, 2011

Saying Yes: The Lesson I Learned When Falling From 10,000 Feet

For those of you who know me well, I think you could attest to the fact that I am a pretty conservative guy. I suppose you could also say that participating in extreme sports is pretty out of character for me. In fact, growing up in Nebraska, I was one of the few boys in my neighborhood that did not play football (not that football is an extreme sport). Part of my lack of participation stemmed from my Mother’s fear of my injury and the other was that I was a lanky and awkward pre-teen.

So two weeks ago when a close friend asked me to go jump out of a plane to celebrate his birthday my default response would have normally been to tell him to go take a hike. But for some reason, this time I said yes.

Now don’t get me wrong, I immediately wanted to back out, I was scared. Being the realist that I am, I was instantly thinking about all the possible ways that jumping out of an airplane with a glorified backpack strapped to my body could go wrong – if there was a terrible outcome, I thought of it. But for some reason I still showed up for the two hour car ride to the air strip.

To make a very long story short, when we were cruising at 10,000 feet and the door of the airplane opened I realized that if I had simply said no I wouldn’t be jumping out of a plane with hopes of my parachute opening. Even during the first three seconds of free fall I was seriously questioning my judgment of the whole scenario.

But then it happened...

After a few seconds of sheer terror when I let myself fall from the security of the airplane; I entered into one of the most breath-taking and memorable experiences of my life. Words cannot describe what 45 seconds of free-fall feels like. There are probably only a few things that are as insane and as memorable as falling with no restraint at 120 miles per hour. And that is when I realized that I would not have experienced all of this if I hadn’t said Yes.

I am sure a few of you are curious where my skydiving story fits into personal finance.

SkydivingOften I force myself to slow down and see the “forest through the trees”. It is so easy to get stymied in the day to day requirements of starting a business and even just every day life! I have to remind myself to remember the big picture and enjoy the ride.

Accumulating and preserving wealth is the same way. Saving and living within your means is not accomplished with a short burst of effort, it’s accomplished over a lifetime. It’s easy to get bogged down while you are diligently stashing away your hard earned dollars for the future. If you aren’t careful it is easy to slip into scrooge mode and become a hoarder that no one wants to hang out with. And that is why you have to enjoy the ride.

We all need to say Yes to opportunities along the way!

Saying yes for some of you might be as simple as allowing yourself to occasionally take the family out to eat instead of cooking at home. For others it’s going on a family vacation or upgrading the home television. Saying yes will be different for all of us but the point is to allow yourself to do it.

If I had not said yes to jumping out of a plane I would have missed out on a great story and a memory that will last a life time. Make sure that you are not missing out on great stories and memories – Say Yes to opportunities!

Thursday, April 14, 2011

Bask in the Glory of Success

It’s really pretty simple when you think about it… we have limited resources and an unlimited number of spending opportunities. When it all comes down to it we are forced to make those tough decisions because we have a natural budget (assuming you are not racking up credit card debt) – we just don’t have enough money!

I have been thinking a lot about climbing the tall mountain of financial independence lately. It sometimes seems like a lonely, narrow road with no end in sight. So I wanted to give you some encouragement today. We often get bogged down in the day to day of trying to pay down debt, save, and plan for the future.

To be honest guys, I even start to feel burnt out after a while.

So how can you avoid burn out? After all it’s a long-term game! So here it is, the five steps to avoid burn out…

I call it the Success Cycle:

Success Cycle

It’s all about setting a goal, achieving it, and rewarding yourself. Let’s do an example.

Annie has a goal of saving $10,000 for a down payment on her first house. She has been doing a great job of climbing the tall mountain, so she has an emergency fund, no credit card debt, and is living on a budget.

Let’s be honest guys, if Annie wasn’t doing the three basic steps above could we really even begin to think that she would be able to save $10,000? No Way! Without those three steps Annie can’t have this goal. So for some of you out there your first short term goal might be one of those steps.

So Annie determines that she wants to save this money, how does she know what a reasonable time frame is? She doesn’t want to be too aggressive, otherwise she might give up in the middle. She also doesn’t want to be too laid back or she will feel like the goal is not worth it.

My rule of thumb is: Any short term goal should be accomplished in 18 months or less.

Annie should examine her budget and use the 18 month rule to set a timeframe. Let’s say she decides to save $10,000 in the next 12 months. The next step is to determine what her reward is. Let me just put it this way – it has to be worth it. If you saved 10 grand and your reward was an ice cream cone, would that be very satisfying? No way! You know yourself, you know what will make you feel like it is worth it; so set a reward that will accomplish that!

The last step is to bask in the glory of your reward and success. Live it up! You really need to enjoy your reward and take a break from the intensity. Then after you are recharged – do it again.

This might seem basic… that’s because it it! The success cycle is just like anything in personal finance, it’s not rocket science! You can do it and this method is proven to help keep you from getting burnt out.

Monday, April 11, 2011

Kids and Money

I will occasionally repost articles that I found interesting, thought provoking, or entertaining. Ronny and I have been talking with each other a lot lately about kids and money. When this article was published last week it seemed very timely to me, so I thought I would share it:

7 Things You Should Never Say to Your Kids About Money

By Laura Rowley on Yahoo Finance

Two-thirds of parents think they could be doing more to teach their children about money, according to a new survey of 1,000 parents by T. Rowe Price. Only 28 percent of respondents say they are very prepared to discuss financial principles with their kids, such as setting goals, the importance of saving, smart spending, inflation, and diversification. Part of the problem is parents are foggy on some of those concepts: On average, they grade themselves a "B" for their knowledge about money, with more than one-quarter grading themselves a C or lower, the survey found.

I initially thought I would write a column about how to raise money-savvy kids. But that information is ubiquitous (see your local library). What struck me as more important is to know what you should never say to your kids about money. What words and attitudes can turn kids into spendthrifts or hoarders, under-earners or workaholics, financial basket cases who may eventually spend thousands of dollars in therapy sorting through their issues?

So I consulted a few money therapists. Here are seven ways to avoid raising financially dysfunctional kids:

#1: Never make money the unmentionable taboo in your house.

"The worse thing we can say about money to our children is to say nothing at all," says Brad Klontz, financial psychologist and co-author of "Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health." Not speaking about money matters conveys the message that it's either an unworthy or taboo topic. "If you do not teach them about money, who will?" says Klontz.

#2: Conversely, never talk incessantly about money.

I recently received an email from a mother of an eight- and 10-year-old, who wrote that she and her husband began discussing money with their kids at age two: "They go with us to the bank, watch us pay our bills, balance the checkbook, etc. My husband has even used our wipe board to explain the process of how money is earned by mom and dad, how it gets to the bank via our paychecks and how it is spent and saved. We tell them everything and I am amazed how despite all of our efforts we still get, especially from the oldest one, 'just use the card.'"

I asked California psychotherapist Kate Levinson, author of the new book "Emotional Currency: A Woman's Guide to Building a Healthy Relationship with Money," to weigh in on the email. "It's really easy with money to be too lax or too obsessed with it — educating too much," she says. "Depending on the kid, if we push too hard, there's a boomerang effect, and kids can respond in the opposite way." Whatever educational strategies you employ, pay attention to how your kids are reacting, Levinson notes.

#3: Never say 'Let's shop until we drop!' to kids without suggesting some parameters.

Money therapist Karen McCall, author of "Financial Recovery: Developing a Healthy Relationship with Money," due out in May, says a fun day at the mall can be disastrous if kids have no idea what the limits are. "Parents can build up anticipation that turns shopping into a negative experience," she says. "The kid learns, 'I can't get my hopes up; he said he was going to buy me a toy, but I can't buy the one I want.' Instead, say, 'we're going to the store and we have $X to spend on your dress or your toy.' Now they have guidelines." Suggest to older kids that they can supplement that budget with their own savings if they'd like a wider selection.

#4 Never make 'we can't afford it' the only response to kids' financial requests.

That statement is a timeless justification that few children could argue with. But in fact, you could probably afford most of what your kids want if you were willing to go to extremes — like cash out your retirement funds, max out your credit cards or sell your house. It might be more productive instead to explain to your children why you choose to spend money the way you do. If you're not careful, you may set them up for a life of obsessive work in pursuit of getting what they felt has always been out of reach. "Or they could decide that since it is out of their reach, why bother trying to get ahead?" says Klontz.

#5: Never turn a child's small mistakes into heavy-handed teachable moments.

I received another email describing a father who wanted to teach his five-year-old not to waste money. On one occasion the child asked his mother to buy him a slice of pizza and then didn't eat it. When the father came home from work, the child mentioned the incident in a lighthearted way. The father took out a dollar and told his son to give it to his mother for wasting her money. The child put his head down and handed her the dollar.

"Be careful not to make a Supreme Court case out of what we perceive as kids' carelessness or lack of respect for something," says Levinson. "A kid's hand slips and the balloon goes up in the air; or maybe he doesn't like the pizza. I don't think these are best places to teach value of dollar. You run the risk of teaching them that what they want doesn't matter. We are better off if we can at least some of the time say, 'I don't like that pizza, I don't want to eat it' — and have it be okay."

#6: Never lay a financial guilt trip on a kid.

Levinson's book profiles a woman named Susan whose parents told her they were taking her out of private school in sixth grade because she was too proud and entitled. In her freshman year of college, Susan's mother found out Susan had tried alcohol, and sent her a letter cutting off support. Susan put herself through college and graduate school, but never saved any money. "I think this was a form of perpetuating my mother's punishment of me," Susan said. Thirty years later, Susan's father confessed they really couldn't afford the private school or college tuition.

Susan's story is extreme, but I've interviewed other adults who feel guilty spending money on themselves, based on childhood experiences. "Kids cost a lot of money, and costs escalate with their needs and desires," says Levinson. "I think it's easy for us parents to lay guilt trips. Some kids get consistent messages from parents that if they weren't spending the money on school or music lessons they'd be flying to Paris or have something that they need. Eventually the kids feel bad or guilty for wanting things in the world."

#7: Never make your child a financial confidant.

In his current research, Klontz has found a "significant percentage" of the population feels better after discussing their financial stress with kids. But that's a big no-no: "Don't use your child as a financial therapist," he says. Children need to know the adults are in control and taking care of things. They're not capable of helping with the big issues, like looming credit card debt or an underwater mortgage. If you lose your job, be honest about the situation and empower kids to be part of the solution. "Have them plan meals, shop for them and cut coupons," Klontz says.

McCall agrees: "Use all resources — time, energy and money — to meet a child's needs. Explain they can't get the new bike or go on the ski trip, but make sure a kid's emotional needs are being met. Go outside and shoot hoops, read a book together. Kids need connection and a feeling of safety and security — they don't need things."

Friday, April 1, 2011

Pod Cast #4: 10 Ways to Win the Lottery… April Fools!


Jim Collison and Andrew Hunt are together again for the April Fools edition of the Financial Tech Podcast.  In a jam packed podcast, we cover some tips and tricks to winning the lottery without ever playing it!  This could be the best 30 minutes of your day.

“I think we have all heard it said before: “Once I win the lottery, then I can do…”
Wouldn’t that be great!? Winning the lottery – wow that would be cool.
·         The odds of winning the Powerball: 76,275,360 to 1.
·         The odds of getting struck by lightning once in a life time: 3,000 to 1
·         The odds of getting struck by lightning twice: 9,000,000 to 1
WHAT!? You are more likely to get hit by lightning twice than winning the Powerball!

So let’s say that you do win the lottery…
Researchers at Kentucky, Vanderbilt and Pittsburgh studied the Florida lottery.
They found the 5.5% filed for bankruptcy within 5 years of winning. Large winners were just as likely to file as small winners!

Money does not change who you are… it simply magnifies your relationship to money!

So what are the take-a-ways?
1. Pay yourself first
2. Have a goal of saving 16.6% of your salary each year
3. Playing the lottery is a waste of time, money, and emotion – Create your own lottery!
4. Achieve your dreams by making it automatic.

On a lighter note… Andrew is a big fan of April Fool’s Day, so here is what he did to Ronny at the office this morning.

2011-03-31 April Fools

2011-04-01 April Fools


Happy April Fool’s – Now go out and have some fun!

Thursday, March 24, 2011

Why 0% financing is not free!

Below is guest post from Ronny Miller, President of Gallup FCU

If you are like millions of other consumers you have been lured into the dealership with the promise of “Free Money”. Ok folks, it’s time for a reality check. Have you ever heard the expression, “If it sounds too good to be true, then it is.” Please repeat after me…..There is no such thing as FREE MONEY!


The first big hurdle to overcome is actually qualifying for the best rate available. Less than 10% of those that apply for dealer financing actually qualify for the best rate available. The 90% that don’t qualify end up with some type of standard interest rate. Regrettably, they don’t walk away from the deal because at this point in the transaction they are too emotionally attached.

Car Dealership

Dealer Financing versus Dealer Rebate

Here’s the standard example. Let’s say you qualify for 0% or instead you could take the $2000 rebate on a purchase price of $25,000 over 5 years. If you take the rebate you would have to finance $23,000 at an interest rate of 4.99% (This is the current interest rate for a new auto at Gallup FCU)

Purchase Price $25,000 vs. $23,000

Payment $417/month vs. $434/month

Total Cost over 5 years $25,000 vs $2,6043

At this point it seems simple right? $417 is less than $434 and you will end up paying $1043 more in interest, so this is certainly a no-brainer decision. WRONG! What you have to consider is effect of prepayment. The average auto loan last 36 months regardless of the original term. Why? Lots of reasons. We trade cars infrequency, auto accidents, and simply paying off debt at a faster pace than is required by the terms of the loan. When this happens the actual cost of borrowing is reduced.

Purchase Price $25000  or  $23000

Total Cost over 3 years $25000 or $24818

Now my guess is you are saying to yourself, yeah, but I’m not going to pay this off in 3 years. Fair enough. You have opened the door to my third and most important point, which is The Negotiation.

The Negotiation

Have you ever purchased a piece of furniture because they had an advertisement for, “12 months, No Interest”? 0% financing is very similar. If that loveseat costs $800 over 12 months with no interest, then I promise you they will take even less in cash today. So what does that mean? I’m sure you have figured it out. They are adding the interest cost right on top of the cost of the loveseat. Essentially, you are paying the interest upfront. Who wants to do that? Cash is a powerful negotiating tool so use it your advantage. Here’s my strategy for car negotiating: In the beginning don’t even mention the idea of paying cash. Let them assume you will be accepting their promotional rate or their rebate. After you’ve done your absolute best to get the price as low as possible then ask them how much they would come down if you just wrote a check for it. My guess, is you will be able to save at least $500 over and above my examples above and possibly more.

Friday, March 11, 2011

The Advice You Would Give Your Mom

There has been a lot of buzz around the financial reform laws that have been passed in the wake of the Great Recession. As a consumer, one of the biggest take away pieces to this reform is the focus on fiduciary responsibility. So what is a fiduciary and why should you care?

A fiduciary is way more than just a big word

Let’s start with some definitions, Fiduciary: “A person to whom property or power is entrusted for the benefit of another” or “A person legally appointed and authorized to hold assets in trust for another person.”

Tall Mountain Ultimately, a fiduciary is a person who is required to act on behalf of another person as if they were acting for themselves. WHOA – that’s some serious responsibility!

Some of you might be saying to yourself, “Andrew, don’t all the professional service providers I work with have to abide by this fiduciary standard?” The unfortunate answer is NO! In fact, being a fiduciary is such a huge responsibility  that many professionals try to go out of their way to avoid this type of liability. You see, if a professional is held to the fiduciary standard and he or she violates that responsibility by doing something that is not in your best interest, they could be held legally liable.

So is your traditional stock broker a fiduciary? No, he is a salesman. Traditionally a stock broker is not responsible for bad advice and for selling products that are not suitable for their clients. On the other hand, your investment advisor who is registered with the state or SEC as an investment advisor representative is a fiduciary!

So why should you care? Well working with someone who is your fiduciary gives you an extra level of peace of mind. You can expect that this person will be giving you the same advice that they would give to their mom. If they don’t give you the advice that is most suitable for you – you have legal recourse to be able to recover any losses you sustain from implementing their recommendations.

As a consumer you should make a point of asking your professional service providers if they have a fiduciary responsibility for the recommendations they make to you. If they answer no, you need to make a serious decision about whether or not you want to continue a relationship with them.

Monday, March 7, 2011

Pod Cast #3 - Let’s Talk About Spending Plans

The financial tech podcast is back and this week Jim Collison and Andrew Hunt walk thru the basics of a spending plan.  Oh, so you are talking about a budget?  Nope, listen and hear how a spending plan is different and why you need to have one!

So is it possible to create a Spending Plan that Works?

When you sit down to budget spend every single dollar “on paper.”  Includes – Spending, Saving and Sharing.  A Zero balanced budget leaves no room for slush money, you are way less likely to fudge when every dollar is accounted for.  Remember its your money!  If it takes $1000 per month to feed your family, so be it!  Remember you can’t spend more than you have – this isn’t the federal government.  Averages are not usually a good thing but people want to know where they stack up:

· Charitable giving: 10-15% of Income

· Saving: 5-10% of Income

· Housing: 25-35%

· Utilities: 5-10%

· Food: 5-15%

· Transport: 10-15%

· Clothing: 2-7%

· Medical: 5-10%

· Personal: 5-10%

· Recreation: 5-10%

· Debts: 5-10%

Give us some feedback! What did you like? What other topics do you want us to talk about? Do you have a specific question you would like us to address on air?

Monday, February 28, 2011

Is 79.9% APR Even Legal?

This is a guest post from Ronny Miller, president of Gallup FCU. Enjoy!

The other day a member forwarded to me a link to an article titled, “Credit card had a 79.9% APR from First Premier Bank”; a creditcards stunning title to say the least. The member who sent it to me was obviously soliciting my opinion and so I decided it was too much to put in an email and too important not to share it with our readers. So here you go.

You might want to take a look before reading my response. Here’s the link:

First of all let’s get a few details out of the way. Is this even legal? Yes. Is this predatory lending? Yes. Does this go against every fiber of my being? Absolutely….but in more ways than you might think. Allow me to explain.

Predatory lending has been going on for hundreds if not thousands of years and for just as long there have been groups trying to stop it. Chances are you belong to one of them; your credit union. We are opposed to predatory lending in all of its forms. Any type of business that is designed to rip off people of lower means or that is deceptive in nature should be against the law. I am on the board of directors for the Nebraska Credit Union League and one of our primary responsibilities is to promote consumer friendly and credit union friendly legislation. A dream come true would be to wake up tomorrow with no more predatory lenders, but that’s just not going to happen.

Credit card companies that charge 79.9% APR, believe it or not, are on the milder side of predatory.

Don’t believe me? Consider any of the thousands of payday loan (aka paycheck advance, check cashing, etc) places that charge a $20 fee on a $100 payday loan for 2 weeks. That’s an APR of 520%. I can already hear your rebuttal. “Yeah, but Ronny, that’s just 20 bucks, and they avoided all those overdraft fees from their bank.” You would be right if they just did it once, but that is never the case. One payday loan leads to another and another; each one larger and more expensive than the last. This is the point at which they usually talk to me because they feel completely helpless and trapped. I have never, without exception, worked with a person who had only done one payday loan.

By now it should be pretty clear that I’m not a very big fan of predatory lending. Ok, time to change gears on you a little bit.

How about this for a suggestion? Don’t get a credit card! That’s not a realistic expectation, you might say. Why not? There are scores of people that manage to have perfectly happy lives without credit cards. It can easily be done. If you have poor credit the only companies willing to offer you a credit card are those that are looking for a way to take advantage of that fact. Avoid this entirely.

How about this suggestion: only spend what you make. If you make a dollar, you can’t spend two. Working with a zero balanced budget will ensure you accomplish this. Spend every dollar on paper before the month begins and then live on that budget.

Ok, one more. If you are going through or have gone through bankruptcy change the way you handle money, permanently. Not every bankruptcy is due to poor handling of money, but most are. There are rare exceptions such as in this case; medical debt. Bankruptcy is a one of the most gut wrenching emotional experiences any one can go through; comparable only to divorce, loss of a job that you love, or even the death of a child. Use this as the motivation for changing everything about your finances.

Need some help getting started? Ask us how.