Conquering Personal Finance

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For Sale By Owner, also known as FSBO, has become very popular in recent years. Selling your own home doesn’t have to be the death trap many real estate agents would have you believe, but you DO have to be willing to do the legwork yourself.

Your most important goal in a FSBO sale needs to be to reach potential buyers. If you think of everything you do to sell your home in that light, you will be much more likely to succeed. That being said, here are the basics you need to accomplish in order to sell your own home.

Prepare Your Home for Sale

Before you can even think of selling your home, you need to get it looking as good as possible. This means:

• Making all necessary repairs
• Cleaning your house from top to bottom, inside and out
• Staging your home to make it look like a model home

Now, doing repairs doesn’t mean you need to do a complete remodel. In fact, in most cases it is recommended that you don’t, as the improvements usually don’t generate that big of an increase in the final selling price. However, a new coat of paint, steam-cleaning the carpets, and fixing that pesky dripping faucet all add to how well your home appeals to potential buyers.

Properly staging your home is also very important. Be sure to get rid of all the unnecessary knick knacks and furniture. Rent a storage unit, and pare down your furniture and belongings to the necessities. Think of how a model home looks — idealized, without the everyday clutter of real life. That’s what potential buyers want to see!

Plan Your Marketing Strategy

Proper marketing is perhaps the most important part of selling your own home. If potential buyers don’t know your home is available, it won’t sell. It’s as simple as that. Furthermore, the more buyers see your listing, the greater your chances of selling, so it is imperative that you market your home via as many channels as possible.

1. Get an MLS listing number. This is the first and most important thing to do, as it will enable buyers to find your home via conventional methods, such as Realtor.com.

2. Hire a photographer or take professional-looking pictures. The majority of people start looking for homes online, so good photography is the second most important part of a good marketing strategy. Take pictures of all the rooms and include several 360-degree spins. Pictures should be taken when your home is clean and staged, and in bright lighting — blinds open and all the lights on. Avoid anything "ugly" in the pictures (no trash cans, open toilets, or streets or sidewalks in the exterior shots) and pretty things up with some flower arrangements. Remember, buyers are looking for their dream house, so make your home look as idyllic as possible!

3. Write a solid listing. A poorly written listing is a red flag to potential buyers that you don’t know what you’re doing. If you’re not sure how to write a good listing, browse through some agents’ listings to get an idea of how it’s done.

4. Put up signs. Some HOAs do prohibit everything except window signs, but always put a sign in the yard if you can — two signs if yours is a corner lot — with your phone number so that potential buyers can call and set up a showing. Also be sure to design an attractive flyer, with several pictures, the price, and a bulleted list of the home’s best features, and put the flyers in a plastic tube affixed to your sign.

5. Advertise. You are saving a lot of money by not paying an agent 6 percent, so be sure to put some of that money into decent advertising! Run your ads in all the major and neighborhood papers in your area, as well as on websites such as Craigslist.

6. Use direct mail. Small, colorful postcards aren’t expensive to make or mail, and are an attractive way to showcase your home to potential buyers. Plus, if the recipients you mail to aren’t interested, they might know someone who would be. A postcard can easily be stuck on the fridge or given to a friend.

7. Start a website. One of the biggest cons of not using an agent is not having a website, since most buyers these days do a great deal of their home search online. Having a website allows you to better showcase your photos and virtual tour. It also enables you to include your URL on your flyers and postcards, ads, and your MLS listing. Google Analytics offers you free website stats so that you can track where your visitors come from, and focus your marketing push on the most effective channels.

Lots of homeowners decide to list their homes as For Sale By Owner in order to save money — and granted a 6 percent commission is a lot of money to save — but don’t make the mistake of thinking that FSBO is free. You still need to spend some money on good marketing, because if you don’t, your home won’t generate the interest you need to get worthwhile offers.

Set a Price

Price is another very important factor in how quickly your home sells. Many homeowners who are selling their own homes think that they can set a price, and if they don’t get enough interest, simply lower it. Not true! The first two weeks after you first list your home for sale are crucial, as that is when the interest will be the highest. If you don’t price the home appropriately from the very beginning, you will lose potential buyers.

The best way to price your home is to find out what other, comparable homes in your neighborhood have sold for in the last three to six months. Calculate price per finished square foot, and look for upward or downward trends during that time. You are better off setting a competitive price and selling your home quickly, than setting too high of a price and lowering it later on.

Set Yourself Up for Success

A great deal of FSBO homes don’t sell, and the homeowner ends up listing with an agent after all. This isn’t because For Sale By Owner is a bad idea, but because most sellers don’t set themselves up for success.

Because the first two weeks are so critical, it is important to get all your ducks in a row before listing your home for sale. Plan ahead so that the website will launch, the ads will run, and the direct mail postcards will all be sent out at the same time as the listing goes live. That means repairs have to be done, pictures have to be taken, and local papers have to be contacted all well in advance of when you plan to list your home. You have one shot at making a grand entrance into the real estate market — make it count, and make FSBO work for you!

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Food For Thought…  There is BIG power in a small quote.  ~BigIsTheNewSmall

• If your actions inspire others to dream more, learn more, do more and become more, you are a leader. ~John Quincy Adams
• A leader must have the courage to act against an expert’s advice. ~James Callaghan
• Inventories can be managed, but people must be led. ~Ross Perot
• It is not because things are difficult that we do not dare, it is because we do not dare that things are difficult. ~Seneca
• Leadership can be thought of as a capacity to define oneself to others in a way that clarifies and expands a vision of the future. ~Edwin Friedman
• The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them while they do it. ~Theodore Roosevelt
• The real leader has no need to lead – he is content to point the way.  ~Henry Miller
• If I have seen farther than others, it is because I was standing on the shoulder of giants. ~Isaac Newton
• A leader takes people where they want to go. A great leader takes people where they don’t necessarily want to go but ought to be. ~Rosalynn Carter
• A great leader doesn’t care about being the leader, but instead cares about the mission, the vision and the people they are leading. ~Scott Williams

Thoughts, comments or favorites from the above list. Share other personal favorites!

10 Leadership Quotes is a post from: Big Is The New Small

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There comes a point in every story when you are ready to quit. It could be a relationship, a project, or your job. Regardless, you’ve had enough, and you are ready to “throw in the towel.”

My friend, Donald Miller, discusses the temptation to quit in his book, A Million Miles in a Thousand Years. In a chapter called “The Thing About a Crossing,” he describes something called a “story arc” or trajectory. This is the dramatic outline that nearly every great story—including yours—follows.

Here’s how it works. You start off fast, visualizing the destination. Everything seems easy. You are a little surprised but soon become over-confident. You think, This isn’t so hard. I’ve got this nailed!

But, inevitably, you come to the middle of the story. Suddenly, things get difficult. You’re working hard, but you don’t feel you are making progress. You feel trapped: You’ve come too far to go back, but you aren’t sure you have enough resources to finish.

Eventually, you push through and reach the destination. But then you realize that the destination isn’t that important. Instead, it is what happened to you on the journey—how you have changed and what you’ve become.

From this quick outline, you can see that the really important stuff happens in the middle. Don describes it this way,

[People] come out of college wanting to change the world, wanting to get married, wanting to have kids and change the way people buy office supplies. But they get into the middle and discover it is harder than they thought. They can’t see the distant shore anymore, and they wonder if their paddling is moving them forward. None of the trees behind are getting smaller and none of the trees ahead are getting bigger. They take it out on their spouses, and they go looking for an easier story” (p. 179)

Are you looking for an easier story? Are you ready to quit?

I was. In the 90s, I owned my own business (with a partner). We loved being in control of our own destiny. We didn’t have to answer to anyone else. We had some initial success, and I alternatively thought, This is a piece of cake, and, We must be pretty good at this. I was pretty full of myself.

But then we hit a rough patch. The business wasn’t so easy. A few big transactions fell through. A couple of clients fired us. Although we were able to pay our employees, we had to forego paying ourselves—several times. It didn’t seem that we could do anything right.

I remember coming home one day and telling Gail that I just needed to lay down for a few minutes before dinner. I went to my bedroom and plopped down on the bed. I wanted to cry but couldn’t. I was numb. I had a wife, five kids, a mortgage and a bunch of bills. I wanted to quit, but I couldn’t. I felt stuck.

Eventually, we made it through. It wasn’t easy, and it took longer than I had hoped. But then I realized that it wasn’t about getting there. It was about what was happening along the way.

I have had many other opportunities to practice “not quitting.” I find that what I usually need is just a little perspective. I start by asking myself these questions:

1. Am I taking care of myself? If I am not getting sufficient rest, nutrition, and exercise, it will affect my attitude. I will have fewer resources for managing the challenges I am facing. In fact, sometimes a good night’s rest can completely change my attitude.
2. Am I asking the right questions? Questions are very powerful. However, they are a double-edged sword. If I ask the wrong ones, I will be left disempowered and depleted.

   Instead, I try to ask question like one the following:

   • What does this situation make possible?
   • What do I like about this relationship/project/or job?
   • How does this challenge provide a way for my leadership or character to grow?
   • What is really at stake here and why do I need to finish?
3. Who can give me some perspective on this? Usually, it’s my wife, Gail. Sometimes, however, I need the counsel of my pastor, a trusted friend, or even a therapist. The bottom line is that you need someone who can provide objectivity and help you see the forest from the trees.

The older I get, the more I see the need to “stay in the story.” It’s always tempting to throw in the towel. But when you do, you miss the most important part of your story—the middle.

1. Both Sides of the Story
2. Leadership Question #2: What Are the Most Important Leadership Decisions
3. What Impact Are You Having on Others?
4. What Keeps You Going When You Want to Quit?
5. Leadership Question #5: Where Do the Great Ideas Come From?

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I heard a story about a man riding a horse at breakneck speed.  It appears he’s going someplace very important.  A man standing along the roadside shouts, “Where are you going?”  To which the rider yells back, “I don’t know.   Ask the horse.”

This seems to be essentially the story I’m hearing from lots of people today.  They’re riding the horse of circumstances, their habits or other people’s expectations.  If that describes you, it’s time to grab the reins and move your life in the direction of where you really want to go.

One of the defining moments of my life occurred when I was about 13 years old.  The direction of my life was pretty clear.  My dad was a farmer – and expected me to help him and to eventually take over the family farm.  I acknowledged that because of my circumstances and the family I was born into, farming would in fact be my future.

Then I somehow got a copy of the little 33.3 rpm recording of Earl Nightingale called The Strangest Secret.  The central message was this – We become what we think about.  That opened a door to a whole new world of possibilities for me that has never been closed.

What are you thinking about?  If your mind is controlled by the bad economy, the recession, the unemployment, the unfairness of the company, the hurt of a past relationship, or the limitations of your formal education, your “horse” will be taking you toward scarcity, misery, and unhappiness.

Honestly, I still enjoy many things about farm life, and love the pleasures of living in the country on our little farm today.  But what I saw as limitations are gone.  And yes, that’s really my tractor – a 1937 Allis Chalmers B.

Where is your thinking taking you?  Is some wild horse of circumstances misdirecting you, or are you moving exactly in the direction of your dreams?

Click here to watch a 3 minute video of The Strangest Secret.

“Finally, brethren, whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are pure, whatsoever things are lovely, whatsoever things are of good report; if there be any virtue, and if there be any praise, think on these things…..and the God of peace shall be with you.” (Phil 4: 8-9 KJV)

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Rick Dancer has been in the television news industry for over 23 years, and I remember watching him on our local news station. I’ve always respected this man, and have enjoyed his YouTube channel where he frequently discusses life and faith. Here’s one of his videos which he cleverly entitled “God’s Wastefulness.”

Rick makes some great points here. God abundantly creates and allows us to do the same. The beauty of this world is truly remarkable, and Rick insightfully points that out in this video.

Check out his website when you get a chance. For you bloggers out there, you can learn a lot about marketing and social media from his endeavors online.

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When it comes to productivity, nothing beats a solid computer with awesome (and free) software. Many are still pen and paper junkies, but there’s just something about clicking another item off your to-do list or automatically accounting for expenses that takes the cake.

Therefore, here are a few free productivity apps that you can grab for free from the web.

ToDoIst.com – Simplistic task management software

Need to stay on task from anywhere you are? ToDoIst is your cup of tea. ToDoIst is a free, online task management system that allows you to group tasks into projects and easily see what you have coming up.

You can view ToDoIst on your computer, phone, or anywhere you have an internet connection! This is crucial because new to-do’s usually pop up when you’re out and about. The ability to enter a new task into the system keeps you focused on the task at hand.

ToDoIst is a great alternative to Things for Mac if you don’t want to pay for the software. Try it out!

Mint.com – All your financial numbers in one place

Mint is perhaps one of the most comprehensive free financial management software applications on the internet today. You start by entering your financial account information which is securely processed and organized. You can create a budget and easily track your financial status from any computer and many phone applications.

One recent improvement of Mint.com is that you can now set financial goals. For example, you can create a “Vacation” goal that alerts you once you have saved up enough money. The progress bars also create helpful visual representations of how close you are to achieving your goals.

OutRight.com – Business accounting made easy

For all the small-business types out there, accounting can be one of the most stressful elements of making money. Keeping track of everything can pull us away from seeking more income. OutRight.com seeks to solve this issue by linking to online accounts (such as PayPal) to automatically keep track of as many transactions as possible.

I’ve found OutRight.com a useful tool for bloggers and online entrepreneurs. Automation is a valuable asset for those who are engrossed in the tech world, and I’d recommend this free online app to anyone needing some help in the accounting department.

So there you have it! These three free online apps are sure to enhance your productivity and get you headed in the right direction. Do you have a favorite free online service? Share it with us in the comments!

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This article was written by Alban. Alban is a personal finance writer who provides tips on how to reduce debt and choose the best low interest credit card.

Getting out of credit card debt is not an impossible task. With a bit of work and a lot of determination it is possible to free yourself from card debt for life.

The simple steps listed here are an excellent way to clear your balance and adjust your budget so you stop spending more then you make.

Credit card debt can feel suffocating. Due to the way that interest and fees accrue on credit card bills it can seem like no matter how hard you work you will never be able to completely pay off your balance. This is most clear when you are struggling to make even the minimum payment each month or if you are unable to make regular payments. Usually people find themselves in credit card debt by accident. They spend on their cards, maybe just a little bit over what they should and get hit with interest charges that cause their balance to rise. Then they may have an unexpected large expense that they have to use their credit card to pay and before they know it the balance has reached an amount that they are simply unable to pay off.

This is why personal finance gets so complicated. People feel trapped in debt so they often give up and resign themselves to a lifetime of credit card bills. There is a better way. You can get out of credit card debt without winning a big money prize or living on canned beans for years. Just follow these three steps and you will be on your way to freedom from card debt.

Step One – Examine your debt.

Carefully look over all of your financial information. Figure out how much you owe and how much interest you are paying on each individual debt. Next, look at your household budget and how much money you bring in each month.

Your budget is a good place to start cutting costs. Are you able to stop spending on some things so that you can put more money toward your debt? By doing so you will spend less on interest and allow yourself to get out of debt faster.

Step Two – Contact your creditors and ask them to negotiate with you on your balances.

It is as important to them to have the bill paid off as it is to you so they will probably be willing to work with you. Depending on the lender and your situation you may be able to get interest rates reduced or waived along with other charges like annual or late fees. They may be willing to move your due date so that all of your bills are not due at the same time.

Step Three – If you are unable to get enough assistance through your credit card companies you may want to look at a consolidation.

One way to do this is through a balance transfer. These are special offers that allow you to move the balance of your old cards to a new credit card for a lower interest rate. This gives you more money to put toward paying off your debt.

Keep in mind that there are no easy ways to deal with your personal finance when you are in credit card debt. But, it is possible to get out of debt by controlling your spending and looking for special deals. Once you have freed yourself from credit card debt work hard to make sure you do not make the same financial mistakes again.

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Now comes the fun part. You get to build wealth and give! If you’re not accustomed to building wealth, this article will give you some practical areas where you can invest and some great ideas for giving stuff away!

Dave Ramsey’s 7 Baby Steps

• Step 1: Save up $1,000 to start your emergency fund.
• Step 2: Pay off all non-mortgage debt using the debt snowball.
• Step 3: Save up 3 to 6 months of expenses to complete your emergency fund.
• Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement accounts.
• Step 5: Work on college funding for children.
• Step 6: Pay off your mortgage early.
• Step 7: Build wealth and give!

Congratulations!

If you’re on Baby Step 7, you’ve come a long way! At this point, you should have paid off all your debt (house and all), built a solid emergency fund, are contributing 15% of your income into retirement, and are planning for your child’s college education. Wow! You’re REALLY come a long way!

But now what? You’re raking in the dough and don’t know what to do with it! According to Dave, money is good for three things . . . .

After years of studying, teaching, and even preaching on this subject across America, I can find only three good uses for money. Money is good for FUN. Money is good to INVEST. And money is good to GIVE. Most anything else you find to do with it doesn’t represent good mental and spiritual health on your part. – The Total Money Makeover

Have Fun Like No One Else

Dave makes it clear that now is the time to have some fun. You’ve done an excellent job at building your financial health! Why feel guilty for spending money?

Having fun can be difficult for some people who have spent so many years trying to save as much money as possible. Dave reminds us that once we are wealthy, going on cruises and buying expensive clothing really don’t affect our cash position that much. Indeed, we should use money for fun. You’ve lived like no one else so that now you can LIVE LIKE NO ONE ELSE!

Invest Like No One Else

To grow and maintain wealth, it is important to keep on investing BEYOND your retirement investments. Surround yourself with knowledgable people to ensure your success.

Dave invests in two main categories:

• The Stock Market: Dave asserts that you can make 12% annual return on your investments if you diversify within mutual funds. See Baby Step 4 for a template of how to invest properly.
• Real Estate: Dave also buys rental properties with cash (never mortgaging). He looks for killer deals and has a lot of faith in the necessity of shelter in the market.

Beware of risky single stock investments. Volatility is your enemy in this game. Instead, seek out sound and steady investments. The reward is almost sure-fire in the end.

Give Like No One Else

Dave tells a great story of a secret santa who gave away money in an extraordinary way:

USA Today has followed a guy who calls himself Secret Santa at Christmas for several years. Secret Santa walks the streets around Chritmastime and gives away $100 bills. Nothing required, nothing expected. Sometimes he gives to people in need, and other times he just gives. Every year he gives away around $25,000 in $100 bills. He started this tradition years ago in his hometown of Kansas City and has moved out across America. He gave in New York after 9/11 and in the Virginia/Washington, D.C., area after the sniper attacks. He just walks around and hands people $100 bills. He gets some fabulous reactions and hears some wonderful stories. – The Total Money Makeover

Isn’t that inspiring? There are so many ways to give, you can be really creative about it! Try giving your waitperson a $100 bill at the restaurant. Help out a friend in need with a generous, anonymous gift. There is something so innately good about giving, it’s sure to be worth your hard work to achieve financial freedom.

Only The Beginning

I’m convinced that after we all move through the Baby Steps, we’ll only have just begun our journey. There is so much to do and accomplish for this hurting world. Money is one factor in this journey. Let’s trust in God throughout the process, and we’ll reach our destination.

How have Dave’s 7 Baby Steps helped you? Where are you at in your journey?

Previous In Series: Dave Ramsey’s 7 Baby Steps: Step 6 – Pay Off Your Mortgage Early

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Ah, you’re ready to eliminate your very last debt – the mortgage! What once seems like an impossible task is now very doable. After all, you shouldn’t have any non-mortgage payments by this point. Plus, you have a gigantic emergency fund to help you weather any storms that might come your way. Welcome, to Baby Step 6.

Dave Ramsey’s 7 Baby Steps

• Step 1: Save up $1,000 to start your emergency fund.
• Step 2: Pay off all non-mortgage debt using the debt snowball.
• Step 3: Save up 3 to 6 months of expenses to complete your emergency fund.
• Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement accounts.
• Step 5: Work on college funding for children.
• Step 6: Pay off your mortgage early.
• Step 7: Build wealth and give!

Don’t Quit! The Rewards Are Great

In Dave’s book, The Total Money Makeover, he warns that many people will be tempted to quit once they hit Baby Step 6. Paying off your mortgage – especially at such a fast pace – seems like a daunting task. Whatever you do, don’t give up at this point. You are almost there!

The rewards of paying off your mortgage are huge. Imagine for a moment that you don’t have any payments in the world – simply pure income. Dream for a moment. Think about how much money you could save, invest, and give! You’ll literally save thousands of dollars in interest as you pay off your mortgage.

Arguments Against Paying Off Your Mortgage

There are many people out there who claim that paying off your mortgage is a bad move. Some claim that getting a tax deduction on your mortgage is worth keeping the mortgage around. Dave dispels this myth in The Total Money Makeover:

If you have a home with a pyament of around $900, and the interest portion is $830 per month, you have paid around $10,000 in interest that year, which creates a tax deduction. If, instead, you have a debt-free home, you would, in fact, lose the tax deduction, so the myth says to keep your home mortgaged because of tax advantages.

This situation is one more opportunity to discover if your CPA can add. If you do not have a $10,000 tax deduction and you are in a 30 percent bracket, you will have to pay $3,000 in taxes to the IRS. Personally, I think I will live debt-free and not make a $10,000 trade for $3,000.

Dave Ramsey’s mentality is that any debt is bad debt and should be avoided and eliminated. It will melt away your stress when you don’t have any payments, and you’ll be on a firmer foundation once you’ve eliminated your debts.

There are many other myths on why you shouldn’t pay off your mortgage (inflation won’t work for you, lack of diversification, etc.), but none of them hold up when you add in the element of “gazelle intensity.” Gazelle intensity (or focused intensity) will help you eliminate any downsides to paying off your mortgage. When you eliminate your mortgage payment quickly, diversification of your investments comes in Baby Step 7 where you can build wealth. Thus the focused, gazelle-like intensity lowers the risk from pouring money into one asset (your home).

Tactical Guide To Paying Off Your Home

Alright, so you may be wondering how to pay off your mortgage. Many people look at this baby step and can’t fathom paying off their mortgage in 10 years or less (many Total Money Makeover participants accomplish this). But remember, you have NO NON-MORTGAGE DEBT by this point. That helps – a lot!

Here are a few things to keep in mind when you are attempting to pay off your home.

• Keep the gap in mind. Always remember to spend less than you earn. Take the extra money, and throw it at the mortgage. The faster you throw money at it, the more interest you’ll save yourself from paying.
• Don’t raise your expenses once you pay off your non-mortgage debt. Many people unnecessarily raise their expenses once they have eliminated a certain amount of debt. Pretend you have to live on the same amount of money as before!
• Discover new income sources. If you really want to fly through your debt, discover new ways of bringing in the dough!

Aim High!

I encourage you to aim high on this baby step. Try to get your mortgage paid off faster than you initially think up. The more zeal you have, the better off you are. Sacrifice to win, and remember the goal: COMPLETE DEBT FREEDOM!

Next time, we’ll be exploring the last baby step in this series: how to build wealth and give like never before. You’ll be surprised at how quickly you can gain wealth once you have no payments. Are you ready?

Next In Series: Dave Ramsey’s 7 Baby Steps: Step 7 – Build Wealth and Give!

Previous In Series: Dave Ramsey’s 7 Baby Steps: Step 5 – Work on College Funding for Children

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If you have children, the question inevitably arises whether or not you should save for their college education. Once you’ve destroyed your non-mortgage debt and built your fully-funded emergency fund, you’re ready to start thinking about your kid’s future. In this baby step, we’ll explore how to put your kids through college without incurring hefty student loans.

Dave Ramsey’s 7 Baby Steps

• Step 1: Save up $1,000 to start your emergency fund.
• Step 2: Pay off all non-mortgage debt using the debt snowball.
• Step 3: Save up 3 to 6 months of expenses to complete your emergency fund.
• Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement accounts.
• Step 5: Work on college funding for children.
• Step 6: Pay off your mortgage early.
• Step 7: Build wealth and give!

My kids can pay their own way!

Some parents choose for their children to pay their own way through college. I understand this concept, as it does teach children to save and be responsible from a very young age. The benefit of having your children pay for their own college education is that they learn money is finite; it doesn’t grow on trees (if you find a money tree, let me know)!

On the other hand, college tuition is inflating at a rate nearly double that of standard annual economic inflation. This is concerning. By the time your child reaches college-age, it might be rather difficult for them to pay their own way through academia. Therefore, I believe Dave Ramsey’s Baby Step 5 is crucial for your children’s long-term success. Start saving now!

The Purpose of College

Dave makes is clear that the purpose of a college education is not to ensure success, but rather to encourage success. Higher education is more of a luxury than it is a necessity. Success is built from knowledge, not a pedigree or your degree. College is one factor that can encourage a higher income, and therefore relatively important.

Dave’s Rules of College

There are two rules of college that everyone must follow while on The Total Money Makeover:

1. Pay cash. In other words, don’t take out student loans! You never know if you’ll land that killer job after you get out. Many get stuck flipping burgers straight out of college, and they have to still pay off those loans while making minimum wage.
2. If you have the cash or the scholarship, go. This is basically repetition, but you need to have the cash to be able to attend. As long as you are able to cash-flow tuition, you should be fine.

ESAs and 529s

So how do you save for your child’s college education? First, start as early as possible. Second, save in either an Education Savings Account of 529 Plan. Here’s a general breakdown of each and what they mean for you:

• Education Savings Account (ESA): This is a savings account that is sometimes nicknamed the Education IRA. It grows tax-free when you are using it for higher education. This tax free growth over the course of 10-20 years can result in plenty of cash for your child’s education if you are investing in growth-stock mutual funds. Dave prefers this method of saving.

If you invest $2,000 a year from birth to age eighteen in prepaid tuition, that would purchase about $72,000 in tuition, but through an ESA in mutual funds averaging 12 percent, you would have $126,000 tax-free. – The Total Money Makeover

• 529 Plan: These are state plans that allow you to save money in one state and go to a college in another state (if you desire). 529 Plans are great for those whose income rules them out for an ESA. The best 529 Plan available is a “flexible” plan.

This type of plan (flexible plans) allows you to move your investment around periodically with a certain family of funds. A family of funds is a brand name of mutual fund. You could pick from virtually any mutual fund in the American Funds Group or Vanguard of Fidelity. You are stuck in one brand, but you can choose the type of fund, the amount in each, and move it around if you want. This is the only type of 529 I recommend. – The Total Money Makeover

But I’m running out of time!

Remember Dave’s two rules: pay cash and go to college if you have cash and/or scholarships. Your kids should only go to college if they can pay cash or you can pay it for them. In trying to accelerate the process of education, you could be setting your kids up for failure if you encourage student loans.

If you’re running out of time and the kids need to go to college now, WAIT. That’s right, you need to wait. Get gazelle intense and save up money as quickly as possible. Try reasonable cash-flow techniques. You can do it!

After you have your college-saving habit in place, it’s time to focus on paying off that mortgage in Baby Step 6! Join us next time for some great tactics on eliminating your last debt.

Next In Series: Dave Ramsey’s 7 Baby Steps: Step 6 – Pay Off Your Mortgage Early

Previous In Series: Dave Ramsey’s 7 Baby Steps: Step 4 – Invest 15% of Household Income into Roth IRAs and Pre-Tax Retirement Accounts

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• Do "The Baby Steps" or "The Wealth Cycle" really work for everyone?
• Should You Pay for Your Child's College Education?
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If you’re the average Total Money Makeover participant, by the time you get to Baby Step 4, you’re two or more years into this journey. Well done! You’ve destroyed your debt, built a solid emergency fund, and are now ready to invest in retirement! Bravo! There are many considerations you should take when getting into investments, so let’s tread carefully here. Again, here are the 7 Baby Steps:

Dave Ramsey’s 7 Baby Steps

• Step 1: Save up $1,000 to start your emergency fund.
• Step 2: Pay off all non-mortgage debt using the debt snowball.
• Step 3: Save up 3 to 6 months of expenses to complete your emergency fund.
• Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement accounts.
• Step 5: Work on college funding for children.
• Step 6: Pay off your mortgage early.
• Step 7: Build wealth and give!

Aren’t investments risky? Shouldn’t I just save my money?

Some people might be questioning why they should invest in mutual funds. From The Total Money Makeover:

Ibbotson Research says that 97 percent of the five-year periods and 100 percent of the ten-year periods in the stock market’s history have made money.

This is nearly a surefire way to make a return on your money. You can make serious progress in investments. Don’t let the current financial climate get in your way. If times are rough, it is especially opportune to invest!

What’s so magic about 15%?

Dave recommends investing 15% of your household income into good, growth-stock mutual funds that have a 5 to 10 year track record making 12% ROI annually or more. You’ll read in Dave’s book The Total Money Makeover that this percentage is based on many years of working with people on their retirement. 15% of your household income into retirement produces great returns while allowing you to save additional income for the next baby steps (paying off your mortgage and building wealth).

Let’s take a look at the typical scenario:

• Bob invests from age 30 to age 60.
• Bob contributes 15% of his household income into retirement.
• Bob’s annual income is $50,000.
• Bob makes an average annual return of 12% on his money.

Given these factors, Bob would have a little over $2,200,000 upon his retirement at age 60. Not bad! I’m convinced that Bob can do even better if he chooses winning mutual funds, which can be done if he takes the time to research his investments well.

How to diversify amongst mutual funds, that is the question!

Dave breaks up investing your 15% into four major categories of mutual funds amongst which you should contribute equally. They are as follows:

• 25% to Growth and Income (Large Cap or Blue Chip funds)
• 25% to Growth (Mid Cap or Equity funds; an S&P Index fund would also qualify)
• 25% to International (Foreign or Overseas funds)
• 25% to Aggressive Growth (Small Cap or Emerging Market funds)

What are some retirement account options?

You’ve probably heard of Roth IRAs and 401(k)s. But how much of your of your 15% contribution should you put into each? Is one type of retirement account better than another?

Dave recommends a prioritized investment approach – investing your 15% until it runs out down the following accounts:

1. 401(k): If your company has a 401(k) and will match up to a certain percentage, take the match! You can’t beat free money! Let’s say your company matches 3%. Invest 3 percentages of your 15% and move on to the next prioritized account below.
2. Roth IRA: The Roth IRA will allow you to grow your money tax-free since you will have already paid taxes up front. This is a huge advantage. Invest the remainder of your money into Roth IRA’s up to the maximum contribution limit (for example: $5,000 per year). If you still haven’t reached your 15% contribution amount, proceed to the next prioritized account below.
3. 401(k)s, 403(b)s, 457s, or SEPPs (for the self-employed): Take the remaining amount you have and invest back into these types of accounts.

True Retirement: Financial Security

Dave usually makes the point that if you’re looking forward to retirement so you can quit work, you need to find another job! Work should be a life-long endeavor. You can always work and find enjoyment in what you do! Instead of seeking relief from work, seek financial security!

Now that you’re investing 15% of your household income into retirement accounts, it’s time to continue to do so and start thinking about the kids and their college! Join us next time for how you can put your kids through college if you start saving now!

Next In Series: Dave Ramsey’s 7 Baby Steps: Step 5 – Work on College Funding for Children

Previous In Series: Dave Ramsey’s 7 Baby Steps: Step 3 – Save Up 3 to 6 Months of Expenses to Complete Your Emergency Fund

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WE don’t need it anymore!
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You like saving money. Okay, maybe on things other than your high-dollar iPhone. Well, now that you have one, wouldn’t you say it’s time to put it to good use and improve your finances? Here are five iPhone apps that are sure to put you on the right track.

1. Ask Dave Ramsey

That’s right! Dave just released his first iPhone application. The app taps Ramsey’s vast database of questions and answers from his radio show. Learn about all kinds of topics such as insurance, mortgages, taxes, bankruptcy, budgeting, and so much more! Dave’s app is currently the #1 free finance app in the App Store. The great thing about this app is that it gives you a concise, text version of the audio clips – perfect for learning during coffee breaks. For more info on Dave Ramsey, read all about his 7 Baby Steps.

2. Mint.com

Perhaps one of the most robust, free financial applications in the App Store. As discussed in this review of Mint.com, Mint now allows you to track your income for budgeting purposes. With Mint, you can attach many of your online financial accounts to get a bird’s-eye view of your finances. I love the budgeting progress bars, which show you how much you’ve spent in relation to where you are at in the month.

3. PayPal.com

Everyone knows and loves PayPal. But did you know you can send and receive money on your iPhone with the PayPal app? If you’re an online entrepreneur or an eBay enthusiast, PayPal for the iPhone is for you. One hidden but nice feature about this app is that you can set up payment reminders – never forget a payment again!

4. ING Direct

I’m a big fan of the Orange Savings Account, and now fans can manage their ING Direct accounts easily on their iPhone! You can use bill pay in order to take care of your payments on the go. Highly recommended!

5. Balance

For those of you who are looking to replace your balance register, try this free app! It’s simple and straightforward. Easily enter all your accounts, and process transactions as you make them. This is a great alternative to pen and paper.

How To Make Them Work For You

It can be tempting to use finance apps as an alternative to cash. Instead, try taking a hybrid approach – use cash and debit cards along with electronic tracking of your accounts. The envelope system is great for people on a tight budget, as it is visual and therefore difficult to hand over cash without thinking about how much you have left to spend.

So there you have it – five iPhone apps to get your finances on track! Perhaps you use a different platform – maybe Android or Windows Mobile. Let us know a few of your favorite financial apps in the comments below!

Hot Tip: Many AT&T customers aren’t aware that they can now save money on their data plan. The vast majority of iPhone owners are paying $30/month for unlimited data. Do you really need unlimited data? Visit AT&T’s website to check on your data usage if you’re a customer. AT&T now offers a $15/month plan for 200MB, or a $25/month plan for 2GB of data transfer.

Photo by Jorge Quinteros

John Frainee is a personal finance writer at TheChristianDollar.com. His goal is to provide biblical financial principles that encourage people to live healthier lives. Beyond personal finance, John enjoys spending time with his wife and two crazy cats, playing a competitive game of Monopoly, and reading just about anything he can get his hands on. You can also find him on Twitter and Facebook.

The articles on this site are for entertainment purposes and should not be taken as financial advice. Please contact a financial professional for specific advice regarding your situation. Also, many of the CPF articles help us pay the bills by using affiliate relationships with Amazon, Google, eBay and others. Find out more here.

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