4 Minutes 4 Hard Times – Financial Fix

            Did you undertake any tips for reducing worry and fear from last week’s 4 Minutes 4 Hard Times post? You might want to try some deep breathing now, because the topic of the week is money. Please note that I am not a financial expert, and even the experts quoted below don’t know your particular circumstances. The advice below is general.

 Today’s first points are highlighted from Dave Ramsey’s book, Total Money Makeover: A Proven Plan for Financial Fitness and also his website, www.daveramsey.com .

            Ramsey’s plan for getting out of debt consists of “Baby Steps” that must be done in order and with “Gazelle intensity”—not a grazing gazelle, but rather the intensity of prey as a predator attacks. To prepare for the baby steps, set up a written budget for the month, every month, and if you are married, agree on the budget together. If a change is necessary mid-month, both spouses must agree and must still balance the budget. Also, stop buying anything on credit.

  1. Save $1,000 as a Starter Emergency Fund – This must be done as quickly as possible, less than a month. Have a garage sale, sell something, work extra hours, whatever it takes. Don’t touch the $1000 except for a true, unforeseeable emergency. If an emergency comes up and you use part of the $1000, replace it ASAP.


2.      Pay Off All Debt With The Debt Snowball – List your current debts, other than the house, from smallest balance to largest.

Pay the minimum payment to stay current on all but the smallest debt. Pour every dollar you can find from anywhere in your budget into paying off that smallest debt.

When it is paid, take what you paid monthly on the smallest debt and add it to your minimum payment on the next largest debt, continuing until all debts are paid.


[Advisor Suze Orman (see below) recommends paying the debts with the highest interest rates first, but Ramsey believes motivation builds faster as you see one debt after another cleared.] Except for the house, if you can’t be debt-free on any item in 18 to 20 months, sell it.


3.      6 Months Expenses In Savings – Pour all you had been using for debt payment into federally insured, accessible savings for serious unforeseen emergencies, like injury or job loss. If it is likely that your job would take longer than 6 months to replace, save more.


[Advisor Suze Orman would advise building savings before debt reduction if you are in danger of losing your job.]


 Read about Ramsey’s remaining steps to financial fitness in his book or online:

4. Invest 15% of Income Into Roth IRAs And Pre-Tax Retirement Plans

5. College Funding

6. Pay Off Your Home Early

7. Build Wealth And Give!


Another excellent book on personal finance is Suze Orman’s 2009 Action Plan: Keeping Your Money Safe and Sound, with her advice for this economic downturn.

What you must do in 2009 about:


  • Make it a priority to pay off your credit card balances.
  • Read every statement and all correspondence from your credit card company to make sure you are aware of any changes to your account, such as skyrocketing interest rates.
  • Work to get your FICO credit score above 720.
  • Be very careful where you turn to for help with credit card debt. Debt consolidators are often a very bad deal. The National Foundation for Credit Counseling is a smarter choice.
  • Resist the temptation to use retirement savings or a home equity line of credit (HELOC) to pay off credit card debt. Stop thinking of credit as a safety net. The only true safety net is savings.


Retirement Investing

  •  Make sure you have the right mix of stocks and bonds in your retirement accounts given your age. (See her book or website www.suzeorman.com for more information.)
  •  Don’t make early withdrawals or take loans from retirement accounts to pay for non-retirement expenses.
  •  Convert an old 401(k) to a rollover IRA so you can invest in the best low-cost funds, ETFs, and bonds.
  •  If eligible in 2009, consider moving at least a portion of a 401(k) rollover into a Roth IRA. Or wait until 2010 to convert to a Roth, when everyone, regardless of income, will be able to make this move. Just be aware of the tax due at conversion.



  •  Make sure your bank or credit union is covered by federal deposit insurance.
  •  Check that what you have on deposit is eligible for full insurance coverage in the unlikely event your bank or credit union fails.
  •  If your savings is in a money market mutual fund sold through a brokerage or mutual fund firm, consider moving your money into the Treasury money market fund at that company.
  •  Build up your savings to cover 8 months of living expenses.
  •  Move all money you need within the next five to 10 years into savings. Money you need soon does not belong in the stock market.



  •  Separate wants from needs.
  •  Get over your guilt that you aren’t “providing” for your kids.
  •  Strike the word “deserve” from the conversation. What you can truly afford is all that counts.
  •  Try to negotiate better terms on a car loan you can’t keep up with.
  •  Be very careful when asked to cosign any loan, no matter how much you love the person who is asking for your help.


Real Estate

  •  Push for a “mortgage modification” if your current loan is too expensive.
  •  Do not use credit cards or retirement funds to pay for a too-expensive home.
  •  Stay informed about new programs, from lenders and the government, in the months ahead that aim to keep more homeowners out of foreclosure. Check www.suzeorman.com .
  •  Build a real savings fund; a Home Equity Line Of Credit should not be your safety net in 2009.
  •  Focus on your home’s long-term value, not its price change from month to month.


Paying for college:

  •  If your child is heading to college within four years and your college savings are in the stock market, you should begin to phase it out of the market, so that you are 100% out by the time he or she is 17.
  •  If you have a child who will enter college in 2009–2010, look into getting a Stafford loan.
  •  If Stafford loans are not enough, parents should consider a PLUS loan. Significant changes to this program last year make this a viable option for many more families.
  •  Stay away from private student loans at all costs.
  •  If you are graduating from college in 2009 with student loan debt, know your repayment options.


To protect your family and yourself:

  •  Build a substantial savings account today so you will be okay if you are laid off.
  •  Do not—repeat, do not—go without health insurance.
  •  Shop for private health insurance if you are laid off; it is often less expensive than COBRA.
  •  Purchase an affordable term life insurance policy if anyone is dependent on your income.
  •  Make sure you have all your estate-planning documents in order.


            An excellent book on personal finance written especially for women is by Suze Orman: Women & Money: Owning The Power To Control Your Destiny. Orman points out that due to the high level of divorce, as well as the likelihood that a woman will outlive her husband, it is irresponsible for any woman to avoid understanding and directing financial matters.

 I’m certainly not a financial expert, but today’s economy requires we all become more informed. I hope I’ve given you a starting point.

 Blessings on your week!

 Betty Arrigotti

1My son, if you have put up security for your neighbor,…5save yourself like a gazelle from the hand of the hunter, like a bird from the hand of the fowler. Proverbs 6:1a,5e

“We buy things we don’t need with money we don’t have in order to impress people we don’t like.” Dave Ramsey

 To Read More:

Orman, Suze (2009). 2009 Action Plan: Keeping Your Money Safe and Sound, Spiegel & Grau.

Orman, Suze (2007). Women & Money: Owning The Power To Control Your Destiny, Spiegel & Grau.

Ramsey, Dave (2003). Total Money Makeover: A Proven Plan for Financial Fitness, Thomas Nelson Publishers.

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