Miller TMMO Blog

I’ve been driving this 13-year old Toyota Tercel (translation, cheap-ass-car) for about a year now. A year ago, I needed to get a new car anyway. The lease was going to be up on my 27-months of Dodge Charger HEMI fun. I originally was looking to get into another expensive lease…..I obviously wasn’t thinking clearly. I realized that after I had started reading about all the things we were doing wrong financially.

My Charger lease payments were $450/month. And that’s after I had paid $4000 down on the car when I signed the lease papers. I think it was actually going to be more like $550-600 a month if I didn’t put a down payment on it. So, let’s just be ultra-conservative and say that $4000 didn’t happen, and my payment was $450/month.

In the year since I’ve been driving my Tercel, that’s $5400 that I have NOT paid out in payments. That’s quite a nice bit of coin. Where’d that $5400 go over the past year instead of towards an overpriced bucket of bolts to get me from A to B? Well, it helped to pay off our other car, and all of our credit card debt (which both loans are gone now too!)

So now that the Charger $450/mo, and the Pacifica $360/mo, and the credit card debt of $150/mo is all gone….the student loan is getting attacked with a fierce intensity. That one should be gone in no time. But the “paying it off faster” is not the part that makes me giddy.

Here’s what gets me fired up. Think about it…if you aren’t forking out $960/mo in the above car payments and credit card payments, and no longer dropping money on student loans. What do you think happens to that money? YOU GET TO KEEP IT!

You heard me. If you aren’t sending your paycheck away in monthly payments to everyone else (with interest), you get to keep your money and put it in your own pocket! What do you get to do when you have money coming in, and can save it rather than spend it before you got it? ANYTHING YOU WANT!

That’s what gets me fired up. Focused intensity is the key to this. Persistence, being consistent, a solid plan of attack, and a personal commitment to never going back to that stupid game of “I have a negative net worth, but I look sophisticated to everyone else” is how financial peace enters your life.

Only one week left until Total Money Makeover LIVE here in Detroit. I’m still going, unfortunately my mom backed out on going with me even after I had bought a ticket for her. Apparently going on vacation up north was more important than financial peace.

So, I have an extra ticket available…but have a few people in mind that I might offer it to. I kinda wish she would’ve told me this way ahead of time…I wanted to get a Platinum ticket for myself. Eh, whatever. I’m still going, even if I have to bite the cost of that extra ticket.

I don’t have exact figures, but I believe we can bump up our total payoff amount to around $34k now after we freed up about $3k that was essentially “extra” in our bills account. I’m not sure how this is happening, but even with all the budget planning somehow our bills account over time seems to still be acquiring more money, when it should just be hovering around the same amount due to inflow and outflow being about the same.

I’ve had a number of people over the past few months tell me that they HAD to buy a new car because they drive a long distance to work and needed something reliable that would not break down on these long trips (NEWSFLASH: any car can break down, even new ones.)  Most of the people I’ve talked with had an older car which either was paid for or was very reasonable and affordable, but was starting to give them some trouble.  So here’s why its a bad idea for you to get rid of your older paid-for car to buy a newer one on payments in the hopes of getting something more reliable.

Cars are mechanical, and all mechanical things can fail, or will slowly fail over time.  Where most people drop the ball is that they don’t plan for these failures.  So when the radiator blows out due to rust, and they have to pay $400 to have it fixed…it’s suddenly a big deal because that’s a lot of cash to pay out of pocket for something you hadn’t planned for.

The reaction is to get rid of the failing car, and go get a new one on payments.  The average car payment in America is between $380-460 a month.  So in a single year, the average person is paying $5520 for their brand new car, every year.  Sure, you got a warranty and don’t have to pay for repairs, but you’re still dropping a ton of money into that car every year just for the privilege to drive it.

At that amount, you could afford to put in a new engine, transmission, full suspension workup, repaint, new tires, brakes, and have enough left over for car washes for a year on a used, paid-for daily driver….every year!  Highly unlikely that any car would need that much work on it, so the repair costs on a reliable used car should be FAR lower than what you’ll pay for a new car on payments.  What you need to do though is plan ahead properly, and keep an emergency fund or car repair fund available.  So think again when you say that paying for a new car on payments is cheaper than repairing an older car.

The second side to this coin is the excessive driving argument.  “I need a newer car that’s more reliable because I drive a lot of miles for work.”  Let’s think about this.  What’s the first thing that happens to a car when you drive it off the lot?  It LOSES value.  Quite a lot too.

What’s the second thing that can happen to a car’s value to cause it to drop quickly.  Excessive miles!  So if you bought a new car, and then put 30K miles on it each year for 3 years and decided to sell it, you’d have a 3 year old car with over 90K miles on it.  Try selling that one at a decent price!

By putting a lot of miles on a car you’re destroying its value.  In some cases, you’re actually lowing the value more rapidly than you’re paying off the loan on it!  If you’re going to beat up a car with high miles, it’s better to do it on a car which has low value in the first place.  I’d rather put a lot of miles on a $3000 car than on a $35,000 car.  At that point the cheaper car almost becomes a throw away car really.  It’s value might dip down to say $1500 if you go to sell it, but that $35,000 car could be worth only $12,000 after putting a lot of miles on it.  That’s a lot more to lose!

The reliability argument is a myth too.  I own a 14-year old Toyota that is more reliable than some brand new cars I’ve owned in the past.  But I maintain it well for far less cost than a payment would be on a brand new car.  You have to plan for it to fail of course.  And if the cost of the repairs is higher than what you can sell it for in a broken down state, then it makes more sense to scrap it and just buy another beater.

This isn’t a permanent thing of course, just like Dave Ramsey says, when you’re getting out of debt you should drive whatever will get the job done at the lowest cost to you.  But once you get out debt and start to build up your savings and wealth, you can buy more expensive used cars.  When you’re in a hole, you need to get your self out of it and digging it deeper with a brand new car and payments isn’t helping you make your way out of the debt hole you’re trapped in.

I’ve seen the same Jaguar XF and preppie looking guy driving down 18 Mile Road 2 days in a row this week on my way to/from work. He has that attitude and look about himself. You know, the one that says “I’m a high-paid sales guy driving an expensive automobile, move out of my way.” Nose is in the air, one finger on the steering wheel as if the car is so advanced it’s driving on its own. I know you’ve seen this guy in your daily life too.

He’s the one that’s married but doesn’t have any kids (kids are interruptions to him. You can’t be successful and wealthy with them getting in the way). He drives home to a 5000 sq. ft. house, because of course how can two people live in anything smaller than that? That’s absurd. On the weekends he spends time on his power boat and jet skis, goes to the casino, or maybe just a weekend trip to New York City to allow the wife to do some high-maintenance shopping.

Does this guy sound wealthy to you?  I suppose it depends on how you define what “wealthy” means.  I’d be curious to find out if this guy could sustain this kind of living for 6 months to a year if his income had suddenly disappeared due to an extreme downturn in sales or even a  job loss.

Most of us gauge wealth by determining how much of our paycheck we can spend in a month, and what that will get us if we make payments.  If that fancy car or extravagant house fits between “zero” and “paycheck”, then we buy it.  Even if it means that it’s going to be questionable if we can afford other expenses (groceries, eating at restaurants, paying utility bills).  We  just let Visa or Mastercard cover the slack we couldn’t plan for.  You can’t make it appear as if you’re not successful, now can you?  People are watching you.  People with the last name of Jones.

I know better now.  I’m not impressed.  When I see that Jaguar go past me, the only thing I can think of is whether or not his monthly payment with insurance is high enough to hit 4-digits.  And then I fight the urge to honk my horn and chuckle at him.  Because when all is said and done on our drive down the road, I arrive at my desk for work the same as he does.  The only difference is that I don’t have to write a check every month to a financial institution to do it.  I get to keep my paycheck and invest or save it to build future wealth.

How do I measure wealth then?  In monetary terms, I measure it based on net worth.  Wealthy people have a lot of assets…liquid cash, investments, paid-for real estate, etc.  Broke people have a lot of liabilities: loans, credit card debt, mortgage debt, car payments, no savings.  But wealth is more than just about money for me.  Here’s a great quote that sums it up:

“Measure wealth not by what you have, but by what you have for which you wouldn’t take money.”

Being wealthy also means that you spend time with your kids and family, help out in your community, donate to charities, build friendships, and live a life of open-handedness and be a giver instead of a taker.  This is wealth measured beyond any sort of dollar amount.

What’s more important to you?  Squeezing every last dime out of your paycheck each month to try to impress people you don’t like with things you can’t afford, or being content and living reasonably allowing you to have real wealth and financial peace in your life?

Looks like I let the ticker (progress meter) fall behind a bit on the blog here, and they eliminated it because I hadn’t provided an update in a certain period of time. Well, I went through the numbers and it looks like since we started working at paying off our debt last year, approximately $31,555 has been paid off in around 10 months or so.
We started working on our budget last August, but I don’t think we actively started making debt snowball payments until September of 2008. Still shocking to me that all cars and credit cards are paid off and all we have left is this huge honking student loan to get rid of.
Looks like at our present rate, we should be done with this in around another 20 months or so, but I think we can kick it up a number of notches, and get even MORE gazelle intense. Time to kick it in high gear, get things moving, and knock this out of the park.

I’m not sure why people think this is a better way. You can’t skip baby steps. There’s a reason they’re in the order they’re in. Yet I constantly read about folks in blog postings, forum postings, and people I run into in every day life that think the Total Money Makeover steps are merely just a suggestion, and you should really adapt the program to whatever you feel is better for you.
Seriously, the only step you should be skipping if you’re able to is saving for college. If you don’t have any kids or they’re already grown up, this is the ONLY step you can skip. Otherwise, do the baby steps in the order they’re supposed to be done! No skipping rungs on the ladder or rearranging them. It doesn’t work, you’ll end up failing or making it take longer than it’s supposed to take.
Step 1: $1000, Step 2: pay off ALL debt but the house. This means ALL debt, not just credit cards. You can’t skip this and say your on step 3, which is: save 3-6 months of your expenses, Step 4: Invest 15% for retirement, Step 5: save for college, Step 6: pay off your house, and Step 7: Build wealth and give it away.
Ready…set…go! Get it done!

Well, some decent amount of time has passed since I last posted. I can’t remember honestly where we were at when I posted last (yes, I could go look, but that’s too easy). We’re getting closer and closer to being debt free…every month.
I think since I last wrote, we finally had finished Financial Peace University. I’m glad I got a chance to go through the program. Hopefully I can hook up with Kensington Church and help out with their large classes in the fall.
We also managed to pay off another car. Yes, the Pacifica is fully paid off now. I believe we had a 5 year loan on it for about $18K, and it was paid off 2.5 years early! SO, we own both vehicles now. It’s a huge relief to not have any car payments at all. I don’t think this has ever happened…ever… in my life.
Beyond that, we ran into some trouble making payments on our student loan. Seems that the company we have the loan through likes to just apply larger payments as “future payments”. So they still get their interest.
We’re going to circumvent this stupidity by just dropping our snowball payment into a money market account, and then still only make the minimum payment they expect. At the end, we’ll just make one huge lump sum payment to them and just pay it off in full.
Things are going well otherwise. I’m going to the Total Money Makeover LIVE event here in Detroit in August with my mom. She read Total Money Makeover and is interested in the material. Should be a good seminar.

Let’s talk for a minute about something that is a difficult concept to grasp for some folks that I interact with on a regular basis.  The wonderful concept of your personal “Circle of Influence“.  Anyone who is a fan of Covey will recognize this instantly….and, if you’ve listened to The Dave Ramsey show recently you’ll also recognize that he talks about this concept on a fairly regular basis.

The problems in our lives basically revolve around defining things into one of three categories: 1) No concern at all, 2) Stuff you care about, but can’t do anything about, and 3) Stuff you can proactively do something about.

Where do you focus your time?  Your energy?  Are you a worrier?  Do you constantly worry about how the economy is going right now, and wonder who’s going to fix it for you?  Are you constantly dwelling on how you think government is going to affect your life (good or bad)?  Do you always complain about how everything around you is bad, and that you wish someone would just fix it?

If you identify with any of that, then you my friend are what is known as a reactionary type of person.  As Covey points out, you focus on the weaknesses of other people, things in the economy/environment/government/business that you have no control over.  Your time is spent blaming other people, accusing, using reactive language, and always playing “the victim” in situations.  You are missing “the question behind the question”.  You spin your wheels a lot….but you go nowhere with your rhetorhic.

On the other hand, people that live within the Circle of Influence acknowledge that there are things that they can change in their lives, and do have direct control over.  The focus on things they can influence and use to better their lives.  These are proactive people that don’t settle for just sitting on the sidelines worrying about who’s going to fix their problems….they realize that they ultimately are in control of the direction of their lives.

What does that mean?  People that focus on the Circle of Concern are never happy.  They’re always chasing something…chasing that line that the bully in the schoolyard draws and dares you to cross over.  They think what’s “out there” is the problem.  The outside-in approach…”what’s out there has to change before my life will be changed for the better.”

Circle of Influence people concentrate on the inside-out approach.  They focus on how they can “be” different…be more resourceful, be more helpful, be better at adjusting to the economy by cutting back on out-of-control spending, be more cooperative, be dedicated to improving their education and career.  They don’t waste time an energy on things that don’t provide any benefit to their lives.

This change of focus involves quite a paradigm shift.  It’s a change of character.  Something a lot of people aren’t willing to put the effort into.  But I’m not most people.  I don’t do what normal people do.  I don’t live my life that way.  I’m for sure living within the Circle of Influence.  Probably to more of an extreme than most people.

I don’t watch much TV, listen to news, read the newspaper, or get involved heavily at all in politics.  I don’t play video games much anymore.  I don’t go to the bar after work.  I don’t watch sports, car racing, or bet on horses.  I don’t go to the casino, play the lotto, or invest in single stocks.  None of these things serve me or my life well.  As far as I’m concerned, none of that stuff provides me any benefit to my life by investing time into it.

What do I do?  I spend time with my family.  I read a lot of non-fiction books which provide some kind of educational value or useful wisdom aligned with the goals I have in life.  Lately I’ve been reading the Bible.  I spend time studying people that are where I want to be in life, and hang out with friends that are like minded in their goals, dreams, beliefs, success, and faith.  I put time into my career outside of my career, and I don’t mean working extra hours.  I do what I do because I love it, and do it on my spare time to learn more.

I focus on things that cause me to be a better person, improve my relationships with my wife/kids/friends/family/coworkers, improve my knowledge in the areas of my life that I want to excel in.  I’m not a kid anymore.  Wasting time on stupid things doesn’t get you anywhere.  And I’m not sitting around waiting for someone else to fix my life and make it better (such as the government) while I watch some dumb TV program and drink a beer.  I’m going to concentrate on what I can do to make my life better.

Don’t get me wrong, I don’t think you’re evil if you like to drink beer and play video games.  There’s absolutely nothing wrong with that.  If you like to do that kind of stuff, then that’s fine.  I like to do that stuff too, but when your whole world revolves around stuff that doesn’t serve you, or stuff you have no control over, or stuff that is having negative effects on you… you’re out of balance.  You either have no goals, or you’re focusing way too much on the obstacles in your life, and like Henry Ford said: “Obstacles are those frightful things you see when you take your eyes off your goal.”

Circle of Influence. Stop spinning your wheels on things that get you nowhere.  Stop worrying about things you don’t have any control over, and concentrate your time on things you can change in your life.  Stop complaining about taking punches in the face that the economy is throwing at you, and learn to duck and roll with those punches.  Stop blaming others for your problems, or what you percieve as problems when they really aren’t.  Stop letting life happen to you…and start making life happen for you.  Be proactive, not reactive.

So the 3 Total Money Makeover books that I bought in Grand Rapids are already gone! Unfortunately I have a feeling that only 1/3rd of those are actually going to get read. I gave two of them away (those are the two that I think are going to sit on a shelf and just collect dust), and sold one back to Chrissy for a co-worker (that one I’m quite sure is going to be read with some great intensity).

Too bad that some folks, even when you give them a helping hand, aren’t interested. Not much I can do about that I guess. “Those convinced against their will, are of the same opinion still.” I’ll still continue to give them away. Someday, each one of those books will be read by someone, even if it’s not who I gave them to. I hope whoever that person is find some value in it.

While we were out in Grand Rapids for Total Money Makeover Live…I picked up one of the Financial Peace Jr. kits along with the entire book set of FPJr. books featuring Junior.  I spent a few hours with our son Zack a couple weekends ago showing him how the commissions board works, we listened to the CD, and he picked out something he really wanted to buy.

We put three chores for him to accomplish all week, and every night we check the board to see what he’s completed.  He did great his first week.  I excluded the nights where we just weren’t home for him to complete some of his tasks, but he got 100% of them done.  Most impressive was that he put his clothes on in the morning, and also got changed and ready for bed every night of the week.

So I told him today that we would let him buy something with his earned money off the comissions.  He chose to buy another Giga Pet “minipet”.  It’s a small handheld game that has a pet in it…but this one plugs into a larger game that is playable on the TV.  So it’s actually an add-on as well.  He really wanted another pet, so we searched together and found one that fit within the money he saved.  We ordered it (I let him click the “buy” button) and it should be shipped in a few days.

Very cool to let him see how it works to earn, save, and spend money to get things.  This next week we’re going to start on using the envelopes (GIVE, SAVE, and SPEND).  I have to admit, this is really fun to do even for us as parents.  The most fun is when you see that he “gets it”…he’s understanding how this thing works.

“Train a child in the way he should go, and when he is old he will not turn from it.” – Proverbs 22:6 NIV