Dave Ramsey describes Worrywart as a disease

Dave Ramsey describes worrywart

As heard on the Dave Ramsey show February 22, 2012 (2nd hour):

It’s an interesting disease the human family gets. One of the diseases we try to treat with money is the disease of worry. “Did I buy the right house? Have I saved enough money for retirement?” Worry drives people to do things about things that will never happen, or things that really aren’t as big a concern as we make them out to be.

Ben Franklin said “Do not anticipate trouble or worry about what may never happen. Keep in the sunlight.” Dale Carnegie said “80% of what you worry about never occurs”. Of the 20% that could actually occur, what could we actually do to change it? Nuclear war or the collapse of the dollar, things that could possibly occur we can’t do anything about. For us to worry about such things is a waste of our energy, time and resources.

There is a difference between a worry and a concern. If your child is 18 years old and misbehaving, you may say “I worry about them” but what we’re really saying is we are “concerned”. We should be spending our energy impacting that situation, not sitting around being a worry-wart about the 20% of things that may never happen.

Back-door ROTH IRA

Back-door RothWhat is a Back-Door ROTH IRA? It is a way to take advantage of a brief time in tax law that can save you thousands in future taxes. First we must describe the differences between a Traditional IRA and a ROTH IRA:

Traditional IRA

This is an Individual Retirement Arrangement that allows you to contribute $5,000 if you earn less than $179,000 (if not covered by a retirement plan at work, otherwise the limit would be $110,000). Money is put into this account tax free (deducted from taxable income) and grows tax deferred (you won’t pay taxes on the growth until you take it out at retirement.

Non-deductible Traditional IRA

The same as a Traditional IRA but the money you put in can not be deducted. This is one way high-income earners can save for retirement, they just can’t realized the tax savings when putting the money in.

ROTH IRA

The same limits apply to a ROTH but the funds put into the account is after-tax money. That is to say that the money you put in is not deductible, it has already been taxed. The real benefit of forgoing the tax deduction now is that you won’t have to pay money on the savings OR THE GROWTH at retirement!

Converting Traditional to ROTH

Tax law restricted high-income earners from being able to convert Traditional IRAs (non-deductable) to a ROTH (tax-free at retirement). However, a change in the 2010 tax law removed the conversion limit. This allows anyone to put money into a Traditional IRA and then convert it to a ROTH.

Why do this?

For those high-income earners, this is an excellent way to sock money away for retirement. The Back Door ROTH IRA contributions funnel money through the Traditional IRA into a ROTH legally.

For example:

An American taxpayer in the 25% tax bracket that shifts $100,000 from an IRA into a ROTH would pay $25,000 in taxes. The payment could be split up between 2010 and 2011, but the result is the same. You made money eligible to be put into a ROTH and grow tax free!

It’s a rare opportunity

Taking a back-door into a ROTH IRA is a great idea, but the opportunity will likely end this year. Check with your tax expert or competent professional to be sure this is the right option for you.

Dave Ramsey speaks at Willow Creek

Dave Ramsey At Willow CreekWillow Creek Church, a huge church in the Northwest suburbs of Chicago, hosted three services on February 12th with Dave Ramsey as the key speaker. Over 20,000 people heard him tell his story (did I mention it’s a huge church?).

This was Part 6 in a series titled “The Family Series”.

To watch the video

To watch video of the entire message to go http://media.willowcreek.org/

You can also download the audio via their website, iTunes, and other media outlets.

The first 7 minutes of his message

Below is a summary of what was said in the first 7 minutes:

Did you guys see that? That’s what it looks like when a hillbilly hugs a viking (after Dave gave Bill  Hybels a bro-hug).

Guys, I’m standing up here where Bill Hybels was just standing. This is a little intimidating. You see, I didn’t grow up in church. I got saved about 25 years ago, I met God and am still walking with him but I’m the guy who’s still grateful they put the words on the screen. 

I didn’t know this stuff. The Preacher would saying stuff like “You know when they put Joseph in the hole” and I’d be goin’ “Who’s Joseph and where’s the hole”? I don’t know, I didn’t grow up like this. And here I am in Willow Creek. Wow. I feel like a wiener in a steakhouse. 

(Dave leads in a prayer and invited God to be present while he speaks) 

I grew up just outside of Nashville, TN where I still live now in a little suburb of Nashville called Antioch, TN. Back in Antioch in the 1966 I was 6 years old and at that time that little suburban community was ideally. It was perfect. It was 10 years removed from “Leave It To Beaver”. It was like a perfect little street with perfect little  houses with not-so-perfect people – you know that kind of neighborhood. It was a great little neighborhood. Now it’s become “the hood? but back then it was “the neighborhood”. You know what I’m talking about, those kinds of days

When I got up and drove here this morning, even though it’s like 50,000 degrees below zero I noticed that along the side of the road people are running. Now, we run in Tennessee but we don’t have to dress like Nanook to run. People run nowadays but when I was growing up in those days no one ran unless someone was chasing you. You just didn’t do that in 1966, you know what I’m saying? 

One morning around 7:00 I was getting ready to go to the bus stop and there is a man running up our street. A full-grown man! And he’s running! And nothing was chasing him. 

Now picture this, this guy has got on the gray sweatpants, remember those? No emblem or anything, this is before they were cool. A gray sweat hoodie from Kmart, you got this? I mean, it looks like a bad Rocky movie. And there weren’t running shoes, we didn’t have running equipment because no one ran! So he’s running in his Converse basketball shoes!

His ol boy was 300 lbs, he was a big ol boy. Here he goes running up the street in his gray sweatpants. We had never seen anything like this, the kids are all talking about it. “There’s a grown man running up the street”. 

We told our parents and they looked out the window the next morning. 7:00, sure enough here’s this man running up the street again. It becomes the talk of the neighborhood so the 3rd or 4th morning these the rednecks are out there with their coffee cups watching this spectacle of this man running up the street. It was a great mystery. 

One of the neighbors ventured to his house to ask him why this man was running when nothing was chasing him. And he explained a very simple thing. He said “I had a heart attack, and the doctor said if I didn’t lose some weight I’m going to die”.

This man was running for his life! That’s what he was running for. 

You know, when you have a big enough reason to do something, a big enough “why”, why you are doing something is big enough you can do almost anything and you don’t care what people say. You can go places you’ve never gone, you can do things you’ve never done, you can be a different person than you’ve ever been if you are running for your life. 

We watched that ol boy as he went from 300 to 250 lbs to 200 lbs to 175 lbs, and exercise literally saved his life. Regardless of what his neighbors said, regardless of his fashion look, exercise saved his life. 

Have you ever had a big enough “why” that you would run for your life? 

Dave Reads CNN Money article: House bans Welfare cards from strip clubs

February 6th, 2012 (in the 1st segment of the 2nd hour) Dave read an article by CNNMoney.com about a bill by Congress that being reviewed that will ban welfare recipients from being able to use their welfare cards at strip clubs, liqueur stores, and on cruise ships.

The bill would force states to “develop policies” to keep this from happening

I’m a very skeptical person. How will this be enforced? We can develop and require all the policies we want but enforcing them is where money meets the madness.

What Dave ranted about

Elizabeth Lower-Basch, senior policy analyst at CLASP stated “…many low-income Americans live in areas where banks are scarce, making it hard for them to find an ATM, she said..” She is under the impression that the only ATMs are in one of those three locations.

As a bonus, he talked about a study that talks about cheating on taxes

An article from MSN Money shows almost twice as many people today compared to 2010 believe it is alright to cheat a little bit on their tax returns. Here is a link http://money.msn.com/tax-tips/post.aspx?post=4fd8cd80-7efa-424e-b80b-dac073e609c9

Dave Reads Asset Acceptance pays for deceptive collection practices

After taking a call from  Jillian in Nashville on January 31st (in the final segment of the 1st hour) about settling a debt with a collector.

The company that got served!

Asset Acceptance, LLC settle charges that it used deceptive collection practices when it tried to collect DEBTS THAT WERE NOT OWED, even some that were known to be past the statute of limitations. Here is the article Dave read: http://www.reuters.com/article/2012/01/30/us-debt-assetacceptance-idUSTRE80T1DK20120130

The Federal Fair Debt Collection Practices Act

The FDCPA was put into place by the Federal Trade Commission in 1978. Essentially it was designed to protect consumers from what I would call “very bad manners” by collectors and their tactics to get debtors to make a payment. I’m all for that! The problem is it is very difficult to enforce, like trying to stomp on all the ants before they get away. The collectors break the rules, change their names, and open up down the block under a different name (sometimes in the same place under a new name). In this case, it worked.

How can you prove unfair treatment by a collector?

Here is a short list of things you can do to protect yourself and possibly prove you have been treated unfairly:

  • Keep track of all calls with date, time, person you speak with, and the topics of conversation
  • Let the calls go to voicemail
  • Record the conversation with an audio recording device

There are a number of items on the market to record calls without having to wait for the answering machine to pick up. As long as you let the caller know you are recording the call (for training purposes, of course) then record the conversation. Have the caller note the date, time, and their name on the call before getting into the topic. This information can come in very handy in a court of law.

What Dave Ramsey thinks about the Facebook IPO

Dave took a call on January 30th (3rd segment of the 2nd hour) from Anton in Nashville, a 38 year old debt-free single guy with no kids living at home who wanted to know how to make a lot of money with Facebook’s upcoming IPO.

He’s got the money

Anton has $10,000 saved and wants to get a little piece of the pie when the stock goes on sale (probably the middle of 2012). Everyone is on Facebook so this should be a solid investment, right?

Investing in a single stock

Well, Dave tells us what most people wouldn’t. The problem with FBK (I’m just guessing at what the stock symbol will be, but it sounds good doesn’t it) is that everyone is expecting it to be a good stock, so the initial offering will be in high demand, which will make the price go up. The hype will cause the first few days/weeks/months to be volatile. Buying single stocks is like playing the roulette wheel. You’re betting everything on one horse and it is very risky.

I want to buy some FBK

Gosh, I’m even tempted to buy FBK. But I’ll stick to my MoneyPlan and get shares through mutual funds, just like the .0000000000000001% of Google I own.

Dave Reads BOA gives loan modifications to those who don’t complain on Facebook

If you were listening to the radio show on January 30th (1st segment in the 1st hour) you heard Dave come to the defense of Bank of America, a company who Dave regularly states is a company who mistreats their customers. He read an article from The Consumerist website, where Shoppers bite back.

The article talks about a law suit from the State of Arizona stating BOA is hindering an investigation by negotiating settlements with underwater homeowners who have agreed to take down negative comments from their Twitter and Facebook accounts.

If you’d like to read the article about a borrower who agreed to remove and delete Facebook and Twitter statements he had made about a dispute he had with BOA, go to: http://consumerist.com/2012/01/bank-of-america-accused-of-giving-loan-modifications-to-people-who-wont-complain-about-them-on-faceb.html

Dave Reads Seething Pit of Class Resentment

Here is a link to the article Dave read on Monday January 16th (at the bottom half of the 2nd hour). Here is a quote from Dave’s segment that may get some people riled up, and reading one sentence in a blogpost may cause you to take it out of context, but it’s a pretty potent statement:

“Envy is a sin, and the politics of envy being pushed by both parties right now and by the news media relentlessly are teaching you to be envious are spreading sin.”

Click on the picture to read “It’s Official: Wealth Gap Has Turned America Into A Seething Class Of Resentment

Dave Disputes Debt Management Psychology Hurts Consumers

An article written by Cynthia Cryder, an assistant professor in my hometown of St. Louis, stated that it is undisputed that the best way to tackle debt is to pay down the loan or credit card with the highest interest rate first.

Dave disagreed

On 1/10/12 (half way through the 1st hour) Dave verbally disputes this claim so it isn’t undisputed. But you didn’t need a post from me to tell you that.

I have to disagree with Dave (What!?)

The study is correct and a majority of the statements made in the article are also correct. It can be proven mathematically that paying off a higher-interest balance loan will pay down a balance faster than tackling a low-interest rate account. Example: If you have a $1,000 credit card at 3%, a $4,000 student loan at 4%, and a $15,000 car loan at 10% then paying down the car would reduce the debt faster than making only minimum payments in order to tackle the credit card first.

But this isn’t about math

The problem with this article, and what the statements made by the researchers imply, is that paying down debt has little to do with interest rate. A dozen accounts with a 0% interest rate is still debt. The problem with debt reduction plans that tell you to pay off the higher interest rate first is that you don’t get the instant gratification that you got when you put the debt on the stupid credit card in the first place. Without the “quick win” you lose motivation and quit. Then you still have the debt and a hopeless attitude.

The way humans pay off debt

Math doesn’t pay off debt, humans do. The way to pay OFF debt is to get mad, work extra, spend less, and send everything you can to debt reduction. Reduce it so much that it goes away fast! Experiencing the results of paying off a debt quickly will keep you energized and psyched to keep going, regardless of interest rate!

Make all your accounts 0%

“I wish I had 0% interest rates” you say? You can. Pay off all your debts, smallest balance to largest for the quick wins and you won’t be paying interest. Put money into savings and investments that earn you interest instead!

Those who understand (compound) interest are destined to collect it. Those who don’t are doomed to pay it.

Dumbest Thing Financed

On Monday January 9th (1st segment of the 2nd hour) Elizabeth wrote Dave about her day at the gym.

“I was at the gym today and overheard 2 women talking about Christmas. One woman
proudly told her friend that she bought her daughter a cat for Christmas. The best part was when she said “I put it on a payment plan, it’s only $19.95 a month.”

This prompted Dave to ask listeners to jump in with the “Dumbest thing you ever
financed.” Instantly, Twitter followers sent in their responses.

Some of the best responses (including one I submitted)

  • Cigarettes. I used to buy them on a credit card
  • A tax bill
  • RCI timeshare
  • Lotto tickets
  • A waterbed mattress in 1987
  • I got a loan to finance my stock market trading idea
  • Bar tabs. Still paying them years later
  • My lasik eye surgery. I kept wondering how they would repo them if I didn’t pay
  • A 1984 Macintosh computer with all the extras. Over $3,000
  • A cash advance to a Nigeria Prince who really needed my help
  • We financed a fitness machine in January 2003. It was a great clothes hanger
  • My ex-wife and I once financed $1,000 worth of Mary Kay cosmetics for the garage
  • I used a student loan to buy a new hunting rifle. Is there something wrong with that?

What was the dumbest thing you ever financed?

We’ve all done stupid things with money. It’s hard to spend every penny just right, but making a bad financial decision it isn’t the end of your chances for a taking vacations or saving for retirement. However, continuing to make poor financial decisions will.

Want to do better with your money? This blog brought to you by Steve Stewart, the only Dave Ramsey Trained Coach and Certified FPU Trainer who has been featured in a segment on the Dave Ramsey Show. Let me help you be the person you need to be: A strong provider for your family and a wise spender with the ability to give like no one else.