Financial Peace University Announcement

In my past columns I have mainly used principles in a format and language as taught by Dave Ramsey, a well-recognized personal finance guru in the US. He has written several best-selling books, he appears regularly on shows like Good Morning America, and his daily radio show is about tied with Glenn Beck for third most listeners in the country. As I have mentioned, he doesn't necessarily say anything new, but he packages and explains sound financial principles in a way that's entertaining and easy to understand and follow. 

With that review of why I like to quote Dave Ramsey, I would like to announce the fourth Cardston session of Dave Ramsey's Financial Peace University. It is sponsored by the town's FCSS program and facilitated by Kendall Olsen from Sims Olsen Charted Accountants and me. We ran the first session as a small pilot group in the summer of 2009. That was very well received, so we ran it twice again in the Fall of 2009 and Winter of 2010 with a great turnout and positive feedback. 

The fourth session starts on January 27 and runs Thursday evenings for 13 weeks. If you'd like to see a free preview before deciding to take the class, you can come to the Cardston Elementary School "Pit" next Thursday, January 13, from 7:30 to 8:00 pm for refreshments and a short video introduction. You can also see a preview video online at www.daveramsey.com/fpu. The signup and payment deadline is January 14 so I can order kits. Full details are below. 

If your New Year's Resolutions include improving your financial situation, this will be a great class for you. It will be valuable whether you're deep in debt and having trouble making ends meet or if you're already doing well but want to do even better. 

Free class preview: Thursday, January 13 from 7:30-8:00 pm at the Cardston Elementary School "Pit"
Dates and time: Once per week on Thursdays from January 27 through April 21 at 7:30 to 9:30 pm (13 classes)

Location: Cardston Elementary School "Pit"

Contact: Dave Olsen, david.r.olsen@gmail.com, 403-894-3741

Format: 1 hour of DVD instruction and 1 hour of class discussion

Cost: $120 per family (includes kids living at home) to Dave Olsen by January 14 (facilitator is volunteer position - cost includes audio CD's, book, and lifetime FPU membership)

Benefits: Over 750,000 families have taken the class in North America, and the average family pays off $5,300 in debt and saves $2,700 in the first 91 days. 
More information: www.daveramsey.com/fpu

Entreleadership Principles

On Friday about 40 people gathered at the Cardston Civic Center for the live Internet broadcast of Dave Ramsey's Entreleadership seminar. Attendees were mostly from the Cardston area, but since we were the only host location in Western Canada, we had people from as far away as Edmonton and Calgary. By all accounts it was a great success. A few commented that if they knew how good it was going to be, they would have brought their entire team from work.

The five and a half hours of instruction were a fire hose of profound business and leadership principles with a lot of laughs mixed in. I thought I would share some of the things we learned. I was impressed by the opening discussion about Entreleadership in general. Entreleadership is a word Dave Ramsey made up to describe principles of entrepreneurship and leadership, which go hand in hand for those running a business.

He defines a leader as a person who rules, guides, or inspires others, an entrepreneur as a person who organizes, operates, and assumes risk for a venture, and entreleadership as the process of leading to cause a venture to grow and prosper. He makes the point that organizations are never limited by their opportunities or their team. Rather, they are limited by their leader's capacity, intelligence, education, character, ability, and vision. John Maxwell in his book "21 Irrefutable Laws of Leadership" (a book I highly recommend) calls this the "leadership lid."

Leaders must continually improve themselves in these areas if they want their organization to grow and prosper. The seminar was geared toward business, but the principles apply to any kind of leader, including parents.

I've archived all of my past columns in a blog at http://dollarsandsense-dave.blogspot.com/. You may also join the "Dave Ramsey Fans of Southern Alberta" Facebook group by searching for the group name. If you have any comments or questions you can contact me directly at david.r.olsen@gmail.com.

Announcing Financial Peace University in Cardston!

We have just finalized dates for Dave Ramsey's Financial Peace University (FPU) in Cardston. 

Free class preview: Thursday, January 13 from 7:30-8:00 pm at the Cardston Elementary School "Pit"
Dates and time: Once per week on Thursdays from January 27 through April 21 at 7:30 to 9:30 pm (13 classes)

Location: Cardston Elementary School "Pit"
Contact: Dave Olsen, david.r.olsen@gmail.com, 403-894-3741
Format: 1 hour of DVD instruction and 1 hour of class discussion
Cost: $125 per family (includes kids living at home) to Dave Olsen by January 14 (facilitator is volunteer position - cost includes audio CD's, book, and lifetime FPU membership)

Benefits: Over 750,000 families have taken the class in North America, and the average family pays off $5,300 in debt and saves $2,700 in the first 91 days. 
More information: www.daveramsey.com/fpu

Entreleadership

I'm back after an extra-long summer hiatus. I appreciate the positive comments I've heard in person and by email over the last few months. I've even been able to address some readers' questions directly by email, which I've enjoyed.

This week I'd like to step away from personal finance and discuss small business finance instead. Of course, I will still be referring to Dave Ramsey's principles. He not only addresses personal finance, but he also teaches principles for business finance and leadership with his Entreleadership seminar (http://www.daveramsey.com/entreleadership/home/). He normally gives these seminars only in person. I went with some team members from Kodiak Mountain Stone to this seminar in Portland about a year ago, and the things we learned were well worth the travel and ticket cost. I keep my note-filled workbook on my desk, and we still refer regularly to it as we make plans for our business.

On November 5, for the first time, he will be broadcasting this seminar live to various host locations across North America. We will be hosting the event at the Cardston Civic Center from 9 am to 3:30 pm. Tickets are $40 each (including lunch) and can be purchased at Sims Olsen Chartered Accountants (66 3rd Avenue W, 403-653-3509). The topics covered will include EntreLeadership defined (combining entrepreneurship and leadership); dreams, visions and goal setting; business financial principles; hiring and firing; and making major decisions.

People often ask me how business and personal financial principles differ, and the answer is that there isn't much difference. Businesses should still have an emergency fund of three to six months of expenses. Businesses who have emergency funds are the ones who survive downturns like this. The best way to operate a business is without debt, and those in debt should develop a plan for getting out of it over time.

One thing Dave Ramsey emphasizes in the Entreleadership seminar is that debt amplifies risk. Most businesses prosper because of a few good decisions that outweigh many more dumb decisions. Business owners often become so confident that a new idea will work that they load up on debt to implement it. Chances are that any given decision will be a dumb one, and the debt associated with that idea can kill the business.

So how can you implement an idea without debt? The best option is to use cash, which will cause you to cautiously test an idea until you know if it's a good one or not. It's much easier to spend the bank's money than your own hard-earned cash. If the idea requires equipment that you don't have the cash for, try renting until the idea proves itself. When the idea does prove itself, buy used equipment. Instead of over-hiring, start by outsourcing or using contractors. There are many ways to build a business without debt, but it requires hard work, creativity, and sacrifice. Sounds a lot like how to succeed in personal finance, doesn't it?

If you have any questions or topics you want me to address, please email me!

Welcome to my Personal Finance Blog!

Welcome to my new blog! I have been writing a personal finance column called "Dollars and Sense" for several months for the local paper, and I realized that I could take advantage of technology and broadcast my column to the world! I started this blog to keep an archive of my newspaper columns and also make other personal finance-related comments. 

How Much House Can You Afford?

In my last column I wrote about Step Five of Dave Ramsey's Seven Baby Steps, Funding Kids' College (see http://www.daveramsey.com/new/baby-steps/). Before addressing Baby Step Six, which is paying off your home mortgage early, let's back up and consider guidelines for taking on a reasonable home mortgage. A home mortgage can easily become a drain on your income that makes moving through the Baby Steps difficult or impossible. Not only does a higher-priced home come with higher mortgage payments, but as a bonus it usually includes higher costs for property tax, utilities, and maintenance.

So the questions are, how much house can you afford, and when are you ready to buy a house? Of course, the 100% down plan is always the best option. What a head start you would have financially if you pay cash for a house! Unfortunately, this option is not feasible for most families, so we'll discuss the next best option - a reasonable mortgage. Dave Ramsey suggests at least a 10% down payment and a monthly payment of no more than 25% of your take-home pay (after tax) on a 15-year amortization. For example, if you make $60,000/year, your monthly take-home might be about $4000/month. 25% of that would be a payment of $1000/month. At 5% interest this would be a $126,000 mortgage, and if you put 10% down, you could buy a $140,000 house.

I know, this sounds very low, especially with current Cardston home prices. There are things you can do to pay more for a home while still following these guidelines. You could increase your income. For example, with a $75,000 income, you could pay about $175,000. You could save for a higher down payment, or you could sell stuff, such as a vehicle you don't need.

You know you're ready to buy a house when you are on Baby Step 4. You have paid off all of your other debts and you have 3 to 6 months of emergency savings in addition to your down payment. Normal people don't have the patience to get to this point before buying a house, but doing well financially isn't about being normal.

I'm not going to predict your financial demise if you don't follow these guidelines perfectly. However, it is important that you understand how all of the costs of home ownership fit into your budget. Be sure to include mortgage payment, property tax, utilities, other living costs, 15% of income for retirement savings, and enough breathing room to save for things like vehicle replacement and replenishing your emergency fund when (not if) life happens.

The dream of a nice home can quickly become a nightmare if you are struggling to make ends meet for 15 to 25 years of mortgage payments. If you're already in a home that you can't afford, have the courage to get out. If you follow the Baby Steps and other sound financial principles, it won't be long before you'll be able to afford your dream home.

If you have any questions or topics you want me to address, please email me!

Baby Step 5 - Funding Kids' College

In previous columns I have written about Dave Ramsey's Seven Baby Steps (see http://www.daveramsey.com/new/baby-steps/). I know that Dave Ramsey is not the only legitimate source of personal finance information out there; however, his methods for teaching personal finance are the best I have found after several years of learning from many different sources. He doesn't necessarily teach anything new, but he packages the information in a way that makes it very easy to understand and follow. The Baby Steps in particular are a great road map for moving effectively through our financial lives.

With that explanation for why I spend so much time talking about Dave Ramsey, I would like to move beyond Baby Step 4, which is when it gets really fun. Getting out of debt, building an emergency fund, and socking away 15% of income for retirement is kind of like exercising for most people. It's well worth the effort, but it's not always the most fun at the time. It requires sacrifice and intensity to get the results you would like. But after you have built the foundation of the first 4 Baby Steps, which only takes 18-24 months for the average family, you can afford to relax a little and be more flexible in your priorities.

Baby Step 5, which is funding kids' college, and Baby Step 6, paying off your home mortgage early, if they both apply to do, can be done at the same time. Different people might place different priorities on these steps. Maybe I will feel more generous toward my kids as they get older, but my priority is to pay off my home before I help my kids with college. Even though it was painful at times, I put myself through university, and I feel like I'm much better off for it. After I pay off my home, I would like to figure out a way to help them without creating a disincentive to work hard for scholarships and in part-time jobs. Please email me if you have figured out a good system for helping kids with college.

In Canada, the Registered Education Saving Plan (RESP) is a great tool for saving for kids' college. The rules can get a bit complicated depending on your situation, so I won't try to cover every scenario in this column. You can learn more on the CRA web site (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/menu-eng.html) or by talking to an investment broker. Basically, the government will match at least 20% of your contributions up to $2500 per year per child. If you contribute $2500, the government will chip in $500. More assistance is available for low-income families.

This benefit is also retroactive back to the child's birth, and each year you can catch up on one year. For example, if you don't start saving until your child is 8, for the next 8 years you can contribute $5000 each year with a $1000 bonus from the government (numbers may vary at little depending on the year). There is a penalty for withdrawing the money and not using it for valid college expenses, but it is only intended to recover the government contributions.

If you have any questions or topics you want me to address, please email me