Financial Peace errata: According to the Federal Reserve Board

Someone in Dave‘s office is playing pretty fast and loose with statistics.

From the Financial Peace University workbook, page 141 (no reference date given to tell us what “last year” means):

According to the Federal Reserve Board, consumers’ outstanding debt on credit cards and other revolving loans has grown continuously over the last decade hitting $1.5 trillion last year.

Guess what? According to the Federal Reserve Board, that’s a lie. Yes, total consumer debt did top $1.5 trillion in October of 2000, but “credit cards and other revolving loans” only made up 43% of that — less than half. So no, “credit cards and other revolving loans” did not hit $1.5 trillion. Even today, with total consumer debt over $2 trillion, revolving debt is just barely over $800 billion, with a long way to go to even the $1 trillion mark.

I say that so casually, don’t I? But man, the emotional impact, talking about that in class, would be huge. Talking about $1.5 trillion, and writing it out with every… single… freaking… zero, would make a hell of a lot bigger impression, I think, than talking about a mere $804 billion. If you’re thinking about how to get teenagers worked up about debt, $804 billion might as well be $1 billion. (Hmm, but maybe I could do something with “three quarters of a trillion dollars” or some such…)

Ah well. I’m at least glad that I checked the facts before I took Dave at his word and used his statistic in class.

Stupid market forces

I was reading Steve Pavlina‘s blog today, and ran across a sentence that I had to stop and read again:

There are a lot more dummies than smart people in the world, and those dummies have credit cards.

It was an angle that hadn’t quite occurred to me before. And I thought, “Oh my God. This explains so much about our culture.”

Because in our modern capitalist marketplace, stupidity is overrepresented. Stupid people (including me, for most of my life) have credit cards and no self-control, and they buy everything that claims to be quick and easy, whether they have the money for it or not. Smart people, on the other hand, really have money, but they don’t spend as much money as the broke stupid people, because they’re smart.

That’s why all the media panders to the lowest common denominator. It’s not because everyone is stupid. It’s because the stupid people spend loads more money than the smart people, because they’re stupid. So stupid people are far and away the more powerful market force.

Scary, isn’t it?

Unnamed youth finance class, intro session

This Wednesday was our first session teaching our as-yet-unnamed personal-finance class to the youth. (They already asked us what we’re going to call it, since “No Matter What” is already taken. We’re all going to think about names.)

We wound up with about ten or eleven people in the class (I should have made a list of who was there, but didn’t think of it till later). They didn’t seem shy about speaking up when we asked questions, even some of the youth who I hardly ever hear from in the larger group, which was really cool.

I was a bit worried about how they would react when we said we were making up our own curriculum, but most of them actually perked up and seemed to get more interested because of that. I suspect it helps that a lot of the youth already know and like me, and know I’ve been to cons. I think it would have been different if I was just someone, who was teaching just some class.

Learned that I’ve got a lot to learn about teaching a class. (Or facilitating, rather. The difference being that teaching is standing on high, passing out information; facilitating is drawing the answers out of the audience.) Facilitating is an incredibly powerful way to teach and learn, but it’s also, I’m finding, very tricky to manage from a time perspective. When everyone wants to give their answer to every question, there’s no time left for the actual class! We got through the class introduction and our first four “opening questions” before we ran out of time.

And yet, the youth were excited about the class, eager to come back next week, wanting to ask their parents if they could stay a little later after youth group so we could make class an hour instead of 45 minutes. Even though we hadn’t even taught them anything yet!

I think there are two big reasons for that. One is that Cheryll was probably dead-on in wanting to limit the class to high-schoolers, though I wouldn’t have realized it before this first session. These are people who have some real-life experience with money. Every one of them has had a job of some sort, even if it’s just delivering papers or babysitting. Several of them have savings accounts. One of them really wants to learn how not to live paycheck-to-paycheck (which is exactly what our first several sessions, especially the first one, are going to be about). They already know that this is something they want to know more about.

The second reason is that we’re listening to them. We spent probably a good ten or fifteen minutes making a list of everything they wanted to learn in this class, because we knew the answers would surprise us. (And they did. Actually, most of the youth are really interested in learning about filing their taxes — not something I would have even thought of.) But that active listening, that taking their ideas and writing them down, really drew them in.

There’s no possible way we’re going to be able to cover everything they listed between now and the end of the youth-group year at the end of April, although the youth are already talking about continuing the class into the summer. Even though we didn’t get past our introduction to the first session, I think I’d consider it a rousing success.

And I hope I never again underestimate the power of listening to a teenager.

I’ll post their topic list later. Gotta go get some exercise before work.

Review of Dave Ramsey’s “No Matter What” youth finance class

Our youth group bought the starter kit for Dave‘s “No Matter What” personal-finance-for-youth-groups class, and I’ve started looking through it.

It’s mostly taught by video. I expected that someone would have written a script for these videos, like they did for Financial Peace University. Turns out they didn’t bother; they just used the video footage from FPU. For the first two sessions, they took the footage from FPU session 1 and cut it into two pieces, added some hip-hop jitter to the captions and some discordant intro/outro music, slapped on an awkward “ask Dave” clip and called it good.

And the result is something that just isn’t relevant to teens. Sure, there are some good jokes, and sure, there’s (some) good content for them. But urging the fifty-year-olds in the audience to save money? Talking about what you do when your children need new clothes? The best way to buy a china cabinet or a dining room suite? Good grief! What about emergencies that matter to these kids? Where’s the stuff about your computer breaking when you have homework due? Where’s the stuff about getting sick while you’re at college and having to go to the doctor? Where’s the stuff about your roommate racking up long-distance charges and the school coming after you to pay them?

This class simply isn’t designed for youth. Someone wrote a first draft of a workbook, did a little video editing, and slapped it onto an online storefront. Dave is on-camera doing new material for maybe thirty seconds in the first session, and the script for that bit is stilted and contrived.

The workbook isn’t as bad, but it’s not that great either. It’s a mixture of mostly-reasonably-good Bible quotes, rambling prose unrelated to the videos, fill-in-the-blank-with-the-least-important-word-in-the-sentence (“Bounced checks are a sign of crisis living“), and the occasional gem. It does not have the same editorial quality as FPU. (Not that the FPU workbook is exactly a shining star of writing, either, but at least it’s a little less first-drafty.)

There just wasn’t much effort put into this curriculum. Certainly nowhere within a couple orders of magnitude of the effort that was put into FPU. And these youth going to pick up on that, and they’re going to tune out, and they’re going to leave, and they’re not going to come back.

(I’m beginning to understand why Dave never talks about this class. I think it embarrasses him.)

So Jennie and I decided, as we watched the video clips this past Wednesday, that we’re going to write our own curriculum. Due in weekly installments, starting this coming Wednesday.

(Guess whether either of us has ever written a lesson plan from scratch before…)

Debt Snowball calculator

We’re finally about to get started on our Debt Snowball for real, and I decided to write a program to help me calculate how long it will take. I’m making it available for free download for anyone who’s interested (GPL-licensed). This is still some pretty ugly code; it’s just the result of a few hours’ hacking. But it works nicely.

The screenshot at right shows what the output looks like, using the sample input included with the app. The program allows a decent amount of configuration (everything I needed to project our own debt snowball):

  • You give it a list of everyone you owe money to, your balance, your monthly payment, and your interest rate.
  • You can tell it you want to spend an extra X dollars every month above your minimum payments.
  • You can also give it a one-time lump sum to add to the first month’s payment (e.g., if you just got a big bonus or a tax refund — something that won’t happen every month).
  • For each bill, it shows how much you’ll pay that month (“pay”), the previous balance (“was”), the interest (“int”), and the new balance after payment and interest (“now”).
  • After a bill is paid off, it still shows up in every month’s report, and tells you how long it’s been paid off. This is for pep-talk purposes, so you see what you have done, not just what you haven’t done.

It’s not penny-perfect (it can’t be; credit-card billing cycles are nondeterministic), but it’ll paint a pretty good picture.

Features it’s still missing:

  • It won’t automatically pay the lowest balance each month, yet. It pays debts in the order you list them in the input file. (You can list them smallest to largest according to their balances today, but if one of them pays down faster than the one before it, the app won’t automatically adjust.)
  • &PBOX_R&

  • Anything I haven’t thought of yet.
  • Anything someone requests that I feel like implementing.

How to use it:

  • Install Ruby if you don’t have it already. If you’re on Windows, use the one-click Ruby installer. (Later I may make a version that doesn’t have this requirement, if there’s interest.)
  • Download and extract it somewhere.
  • Edit the bills.yaml file to tell the program how much you owe and to whom, and to set other options.
  • Open a command prompt and run debt_snowball.rb. (Run it from the command prompt, not by double-clicking in Explorer. If you run it from Explorer, the window will disappear before you can read it.)

Some notes on the bills.yaml file:

  • max_months lets you stop the simulation after, say, 6 months. The only reason this would be useful is if you want to look at the first few months of the simulation, and don’t want them scrolling off the top of the screen. If you want to run the simulation all the way through (to see how long it’ll take to pay everything off), set max_months to some really big number.
  • If it’s not obvious, the “apr” setting is your Annual Percentage Rate. Specify this as a percent, i.e., if your APR is 12%, type 12 (not 0.12).
  • The dash-on-a-line-by-itself-between-each-bill is important.

Like I said, this app is still very rough around the edges. But it does what it sets out to do, so if you want to see how long your debt snowball will take, download it and have a go. Comments, criticisms, abject horror at the state of the code, etc., are all welcome; just leave a comment here.

Of time and rocks

I was so psyched about covenant groups before they started, and now we’ve been doing them for a couple months now and I haven’t blogged about them yet.

Our group has been meeting two nights a month. We start with check-in, which usually lasts through the first hour, and then there are some readings and a topic for discussion, which takes up the second hour. We’ve had some good topics (silence, experiencing the holy) and one that everyone agreed was kind of a dud (what the chalice symbol means to us).

Last night’s reading was about a time-management instructor who, as a visual aid, filled a jar with big rocks, then filled in the spaces between them with gravel, and then sand. If he’d done it the other way around — starting with the sand — the big rocks never would’ve fit. The point being, you have to schedule the most important things first, and then let the less important things fill in around them, not the other way around.

The discussion questions centered around “What are the ‘big rocks’ — the most important things, timewise — in your life?”

As usual, the topic was fairly lively. We spent about half of the second hour discussing funerals, although I have no idea how we got off on that tangent.

Anyway, as other people talked, I mulled over the question, in light of what I actually do with my time (like play video games, read books of comic strips, and surf the Web). I finally said that I don’t really know what my “big rocks” are. There are a lot of things I’m really enthusiastic about in the abstract, but lose steam when it comes time to spend time on them. I was really excited about covenant groups, and now I haven’t even blogged about them. I think OWL is really important, and was happy to agree to help teach it, but I always seem to put off looking at the next week’s lesson or researching the question-box questions until the last minute. I really want to see our church offer Financial Peace University, but when it comes to doing the legwork to build support in the congregation, I just don’t follow through. I procrastinate a great deal, and seldom make time for the stuff I actually feel is important and that I want to give my energy to.

And Gene asked me a question that really startled me. He said, “So, is procrastination one of your ‘big rocks’?”

Of credit cards and Swiss army knives

One of the things Dave does on his show is to have people call in and, on the air, cut up or otherwise destroy their credit cards. Creative means of destruction are encouraged, but anything will do: scissors, shredders, firearms, whatever.

Some friends recently loaned us the first season of MacGyver on DVD, and I think MacGyver set a new standard when he used his Swiss army knife to slice up a credit card to jam a traffic light so he could get out of the country.

My kind of guy.

Money priorities

Sox is sick, Jennie lost her job, and we’re getting sued.

By the end of this week, I was really starting to stress about the money thing. We haven’t revised the budget since Jennie lost her job earlier in the week, but I had assured her it was okay, we had the emergency fund to cover things like this. But yesterday, after I found out we were getting sued for two thousand some-odd dollars (let this be a lesson: never, never, never, never co-sign someone’s apartment lease), I was starting to freak out.

And then last night it hit me: my priorities were backwards again. Here we are, planning to pay off one of our debts this month, and at the same time, we’re pulling money out of our emergency fund to pay for doctor bills and lost income and vet bills and court costs.

And once I realized that’s what we were doing, I couldn’t help but see how stupid it was. No matter how annoying these collections people may be, they are not a necessity of life. They can wait. We have to take care of us first. We’ll keep making our little payments to them, and we’ll pay them off when we can, but alas, they’ll have to keep paying someone to annoy us for a while yet.

So, we’re going to adjust our budget for the loss of Jennie’s income, we’re going to pay Sox’s vet bill, and we’re already dealing with the lawsuit thing as best we can for now. The annoying creditor won’t get paid off this month, but our emergency fund will continue to be funded, which sounds like a really good idea when there’s a lawsuit hanging over our heads.

I’m not totally over my panic yet, but it’s getting a lot better since I got my priorities straightened out. It’ll get better yet when we actually sit down and revise the budget, and I can see all the numbers, and prove to myself that it’ll be okay.

But first, I’ve got a sick cat to take to the vet.

Loot 2005

We had a good Christmas.

It was good to see family (including cats), and of course there was lots of good food. There was also a load of loot. Serious loot. I mean, we’re talking 116-piece drill-bit set kind of loot. Massaging foot spa kind of loot. Forty-nine-piece food-container system with interchangeable lids on a spinning carousel as seen on TV kind of loot. And, of course, the big Christmas check from Mom and Dad (which, to our happy surprise, was much bigger than even in years past).

Not just that, but I had also been doing an evenings-and-weekends project at work with a couple of other developers. We finished that up just before Jennie and I left to go visit family. Between the bonus I got for that project, and the Christmas check from my parents, we had a little less than half a month’s extra salary lying around (!).

Of course that money went into the budget; we weren’t about to have it disappear and wonder where it went! That doesn’t mean we couldn’t have any fun with it, mind you; in fact, we added a “Toys” category to the budget this month. I bought a used laptop from work at a pretty good price (and it’s running pretty well for only having 256 MB of memory), and we picked up a digital camera on clearance.

But the bulk of that money is going to pay off another creditor, and that will be money well spent. Per the Financial Peace plan, we’re punting the lowest balance first. As an added bonus, they’re the ones that have been the biggest pains in the ass (sending our checks back because they “don’t take partial payments” and then calling to chew us out for not paying; it’s actually rather amusing). There are only two disappointments: one, that they might think their harassment tactics actually worked; and two, we won’t get to make fun of them anymore. Ah well. I think we’ll live, on both counts.

So the money thing is definitely going well. We’ll even be able to fully replenish our emergency fund (which we raided last month to fix the car’s radiator — I think this is the first time we’ve ever had a car crisis without a money crisis to go with it!) But the family thing was also great, the food was great, the gift-giving was great, the Christmas Eve church service where we sang “Silent Night” by candlelight was great, the time to read books and play Playstation was great, even the Trivial Pursuit was pretty good. Good downtime, good time.

I’m not sure I’m ready to go back to work yet, but I’d better be, since I’ve already been back for four work days. But it’s definitely been a great Christmas.

Now we just need to find time to take our tree down…

The 50-30-20 rule

Marcel introduced me to Steve Pavlina’s blog earlier this month. I’ve added Steve to my Google homepage, and read the posts that look most promising. Steve has some good food for thought, although I kind of doubt he’s going to convince me to go vegan.

Steve’s latest post is about the 50-30-20 rule. I can already tell this is going to spark some good thoughts and discussions between Jennie and me, and possibly at work too. It’s interesting just to think about which things fall into the three categories.

The full article is well worth a read. Go check it out now. I’ll wait. (Besides, the rest of this post won’t make much sense unless you at least know what the categories are.)

So at home, things like paying bills, doing laundry, doing dishes, cleaning the bathroom, etc., are C tasks: 90 days from now, they won’t really matter. We still have to do them or we’ll get in trouble, but they don’t have long-term effects. If all we do from now until retirement is wash dishes, we’re not going to have many happy memories to look back on. Things like watching TV and playing video games are also definitely C tasks.

My blog? Posting depends on the type of post; it’s probably a C most of the time, although I hope some of the OWL and Financial Peace posts fall closer to a B. Deleting comment spam is definitely a C. Working on the hamster (as I did this past weekend) is something that eliminates C tasks, so it’s squarely a B.

What about working on our budget? The exact details of next month’s budget won’t matter 90 days from now, but the effects of having done that budget are substantial; it’s saved our butts every month we’ve done it, because something big always comes up, and we always go back to the budget and find the money. (I still can’t quite believe it, and I don’t know how we do it, but it has worked every month.) It’s certainly been more than 90 days since we started budgeting, and we’re still feeling the effects from that first month. The budget is probably a B task, or even an A. (Hell, if we hadn’t started doing a budget, we’d probably have filed for bankruptcy by now. No joke. So there’s a serious case to be made for counting the budget as an A task.)

Spending time with Jennie could fall into any of the three categories. Eating on the bed and watching TV would be a C, I think. Eating out and talking? B, at least. Going for a walk together? Spending a quiet weekend in a motel somewhere? Again, B, at least; maybe A. Going to FPU class together? Teaching No Matter What to the youth group? Teaching FPU at our church? All A.

And then, what about work? Reading e-mail is a C task. So is the daily stand-up meeting, and probably the weekly planning game; not sure about release planning meetings. What about fixing bugs? Coding new features? Refactoring our existing code base? Writing unit tests? I’d guess those are probably Bs. Yes, unit tests have value for as long as they’re around, but I’m not sure most of them have an individual half-life of more than two years. But there’s plenty of room for debate on that.

I can think of two categories of things I do at work that would definitely fall into the A category. One is working on improving our XP process. Making it work more smoothly. Getting our customers more involved in the process; helping them write acceptance tests. Helping management understand, in more and more depth, how XP is really supposed to work. Pushing back when they want to release every two weeks, even though we don’t have enough automated tests yet, and that kind of schedule doesn’t give adequate time for manual testing. Just in general oiling the gears so that we can get our work done. And, in general, stuff I’m not all that good at, or excited about, doing. But it’s some of the most important work we have to do. Hmm…

And the other category of work A-tasks is, stuff that will help me. Not just my current employer, but me, for my entire career. In my job field, that means learning. Learning better ways to write tests. Learning better ways to factor code. Learning new languages, new toolsets. Taking training classes. Going to BorCon.

One thing Steve doesn’t even talk about is money. How could we apply the 50-30-20 rule to our budget? A tasks, right now, would be things like paying off debt. C tasks would be things like groceries and gas. B tasks seem like the hardest to figure out, but I think things like car maintenance and weatherproofing the downstairs door would fall into this category. We’ll have to look over our budget and start trying to figure out what falls where. It’ll certainly be an interesting way to think about how to spend our Christmas money.

You know, it’s really kind of disturbing to look at things in these terms, and realize that most of what I do is stuff that won’t matter a week from now. But disquiet aside, it’ll be a fun thing to spend some time chewing on.