- Part 39

You Don’t Need to Be an Expert to Be Successful

Corey — April 20, 2010

While knowledge isn’t really a hindrance to success, you don’t need to know everything to accomplish your goals. After you reach a basic understanding of an area you want to be successful in, you need to start taking action. Continuing your learning after that point is wise, too. But if you never act on what you learn, you’ll never be successful.

First, Learn the Basics

This is especially true in personal finance. You don’t have to be a seasoned financial planner to begin finding success. You don’t even need to spend a ton of time to understand the basics. They’re simple. Spend less. Earn more. Save and invest. Be wise and cautious when making purchases (goods, services, or investments). Plan ahead. Don’t pay things you don’t have to (like extra taxes). And so on. A basic education is all you need to start finding success in your personal finances.

You don’t need an accounting degree to make a budget. You don’t have to be Warren Buffet to start investing. You don’t have to go to law school to get your estate documents in place.

Then, Take Action

Success in personal finance is not necessarily about knowing all the right answers. It’s about taking action. Those who only read about the benefits of budgeting will never be as successful as those who actually try to make a budget and stick to it. This is true even if the doers are not successful the first time.

You can learn by reading about the experiences of others – but only so much. Until you start creating your own experiences, the information will just be knowledge in your head. You must start using it yourself!

Don’t think I’m discounting the value of learning, education, and research. To be truly successful, you’ll have to keep learning. But you can’t get started on the road to success unless you follow a pattern of learning, doing, learning, doing, and so on.

Avoid Danger Areas!

I’ll end with a few cautions especially true in personal finance. In some areas of personal finance, there are unscrupulous people who will try to take advantage of your lack of education. Insurance, investing, and debt are the most common places you’ll run into this, but you can really find it anywhere. Here’s the key: Before doing something, make sure you’re aware of the possible problems/pitfalls and educate yourself on how to avoid them.

Here’s an example. In investing and insurance, you must be aware of how advisors and salesmen get paid. If it’s commissions, know what conflicts of interest might exist. In other words, learn how people might try to rip you off and be on the lookout for those techniques.

Even though there are risks to the learn, do, learn method, you can avoid most major mistakes by learning first about the danger areas and how to avoid them. In personal finance, be aware of those who earn commissions, learn the math of debt, and read the academic research on investing.

Now Do Something!!!

So get out there and start doing the needed things to achieve success. Stop reading about budgeting and do it! Stop worrying about having enough for retirement and start saving! Stop dreaming of starting your own business and do it! You’re never going to get anywhere until you take action.

P.S. I think I wrote this as much for me as for anyone else. I have the curse of perfectionism, and I must battle it every day. There is no such thing as perfect in this world. Only God is perfect. So I need to stop worrying about doing everything perfectly and just start doing. What about you?

In Budgeting, Debt, Estate Planning, Frugality, Insurance, Investing, Retirement, Saving, Taxes, Work

How to Get Out of Debt: Step 5 – Build a Starter Emergency Fund

Corey — April 19, 2010

This article is the fifth in a series on how to get out of debt. If you haven’t already, you should check out the previous articles:

Step 5 – Build a Starter Emergency Fund

By now you should have created a budget and found ways to cut back and earn more. But before you start putting that extra money toward your debt, you need to make sure you have a basic emergency fund in place. I’m not talking about having six months of living expenses saved up. You need enough to cover basic emergencies while you work on getting out of debt.

First, realize that you need an emergency fund. If you have an unexpected expense of $1,000 today, where would you get the money? If borrowing is your answer, consider how much that will set you back on your goal to get out of debt. An emergency fund will help you get out of debt faster because you won’t have to keep increasing your total debt every time an emergency pops up.

Next, decide where you’ll keep the money. Inflation will eat away at your emergency fund if you keep it under your mattress or at your local big name bank. Instead, consider a credit union or high-yield online savings account where you’ll get a higher interest rate. I prefer ING Direct and explain why in my article Where to Keep Your Emergency Fund.

Finally, set a goal for your starter emergency fund. I recommend at least one month’s worth of living expenses to begin. Dave Ramsey says $1,000 and others have upped it to $2,000. But how much your emergency fund should be depends on your personal situation. In fact, a starter emergency fund with one month’s worth of living expenses may not be enough if your income is unstable or you (or your family) are accident-prone. Instead, you might want to shoot for two or three month’s worth to start.

Once you have your starter emergency fund established, we’ll go after tackling your debts. Then you can complete your emergency fund depending on your needs. Paying off your debts without having savings in place is quite foolish, so make sure you don’t skip this step!

Get Free Updates!

If you want to keep getting tips on how you can get out of debt and manage your personal finances well, make sure you sign up for free updates to Provident Planning! I’ll be continuing this series throughout the year while I also explore other aspects of personal finance.

Have you built up your starter emergency fund yet? Let me know in the comments below!

In Debt

I Won $500!

Corey — April 16, 2010

A while back, I wrote an article titled “What Caused the Economic Downturn? How Do We Rebound?” It was an entry for the What Would John Templeton Say? blog contest. With a top prize of $500, second place of $300, and third place of $200, I thought there would be plenty of entries. Unfortunately for the website running the contest, there weren’t. (Though that was fortunate for me!)

Apparently some people thought it was too complicated to garner many entries. I think that’s crazy. It wasn’t very difficult at all. The premise was simple. Taking John Templeton’s lecture “The Religious Foundation of Liberty and Enterprise” into account, which vice is most responsible for the recent economic downturn and which virtue is most important to the economy’s rebound? To learn what John Templeton described as the economic vices and virtues, you simply had to read 10 short posts on the website. Here they are:

Economic Vices:

Economic Virtues:

That was it. I didn’t find the reading or concepts very difficult at all. I think I spent a total of 2-3 hours reading, preparing my thoughts, and writing my entry. Even if I had only won third place, that still would have been a nice return on my time (better than most of the articles I have written…).

I’m not sure what the personal finance lesson is here. When the risks are low and potential rewards high (or just moderately high) then take your chances? Or maybe it’s just to keep your eyes open for opportunities and be ready to take action. What do you think?

In Miscellaneous

Contentment Is Not Complacency

Corey — April 15, 2010

Are you put off by “contentment”? Does it sound like apathy to you? A lack of ambition?

Americans as a whole do not value the idea of contentment. It sounds too much like complacency – like you’ve given up and are just accepting things the way they are. We value the mindset of ambition and a strong desire for success. And too often we think contentment means no ambition at all.

As Christians, we need to understand that the two are not necessarily opposed. While contentment is definitely not going to lead to a strong desire for material or worldly success, it does not preclude us from spiritual ambition for God (not a desire to magnify ourselves). Neither is contentment an excuse to be lazy.

Rather, contentment is the state of being satisfied in the sufficiency of Christ. Our happiness is not dictated by circumstances or our possessions. We find joy in knowing that Christ meets all our needs. It’s important that we have a good understanding of contentment before we dismiss it as something that’s undesirable in our culture.

Contentment Is Fulfillment

Contentment in Christ means we have found fulfillment in Him. Our purpose and meaning in life are defined by God’s purpose for us. We are happy to do His work and to seek His will for our lives. We don’t measure our success by the world’s standards. God’s standards are not the world’s standards. And that’s why the world sees contentment as weakness, as diffidence, as resignation. The world is darkened in its understanding and cannot see the light of God’s truth.

Contentment Is Sufficiency

Contentment in Christ is being satisfied in Him. We focus on the value of the eternal life He gives us. We understand its worth is far above riches and luxury. And because we realize we now have that immeasurable gift of eternal life, we are not consumed by greed and a lust for more and better “stuff”. We recognize that Christ fulfills all of our needs and we are happy in Him.

Contentment Is Appreciation

Contentment is an active appreciation of what we have and a determination to make the most of it. It gets to the root of stewardship – understanding who truly owns all of what we have and desiring to manage it well. It rejects the notion that “I won’t be happy until I get more.” It is fueled by thankfulness and resourcefulness. Contentment is a mark of wisdom.

Contentment Is a Choice

It is clear that contentment is a choice. It doesn’t just happen. We must choose to present ourselves as a living sacrifice to God and follow His will. We must choose to focus on the value of eternal life and the riches we have in Christ. We must choose to appreciate God’s blessings in our lives and manage them well for His glory.

Every single day we must make a choice to be content in Christ. We have an unbridled ambition to glorify Him in all we do. Our strong desire to be more like Him and to serve God does not lead to laziness or complacency. Rather, it energizes us work hard for the advancement of the Kingdom – in our personal lives and in the world.

How would you describe contentment? What attracts you to contentment in Christ? What drives you away (or puts barriers in your path)? Please share your thoughts in the comments below.

In Contentment

How to Garden: When to Plant

Corey — April 14, 2010

Knowing when to plant is one of the keys to having a successful garden. However, it’s not an exact science. But with a combination of knowing your average last spring frost date and general guidelines for each plant you can get a good idea of when it’s best to plant your vegetables and fruits.

Average Last Spring Frost Date

Your average last spring frost date tells when when you can be fairly certain the chance of frost is low. This is important because some plants can’t handle frost and will die if exposed to those low temperatures. You can find out the average last spring frost date in your area by calling your local Cooperative Extension office, which you can find on the USDA’s website.

However, I found the average last spring frost date for my area quite easily on the National Climatic Data Center’s website. Their charts will also show you the average first fall frost dates as well.

In finding the average spring frost date, pick your state and then a city near you. Look at the 32 degree row and then find the corresponding date under the 50% probability column and the 10% probability column. Using the 50% probability date there’s only a 50% chance it will frost after that date. If you want to play it safe, go for the 10% probability date (meaning only a 10% chance of frost after that date). These dates are based on information gathered from 1971 to 2000.

When to Plant What

After you know the average last spring frost date for your area, you simply need to know which plants like it cold and which ones don’t. Here’s a summary of when to plant what:

Very Early Spring (4 to 6 weeks before the last frost date)

Peas
Spinach
Onions (sets)
Garlic
Lettuce
Broccoli
Cauliflower
Cabbage
Potatoes
Chives

Early Spring (2 to 4 weeks before the last frost date)

Beets
Carrots
Radishes
Sage
Thyme
Dill

Mid-Spring (at or just after the last frost date)

Green Beans
Corn

Late Spring (2 to 4 weeks after the last frost date)

Cucumbers
Cantaloupe/Muskmelon
Watermelon
Sweet & Hot Peppers
Tomatoes
Basil
Cilantro
Summer Squash
Pumpkins
Eggplant

Finally, if you’d like more information about specific plants I recommend Harvest to Table’s articles on “how to grow…” and their archives. Obviously there’s more to gardening than choosing a general method and knowing when to plant, so you can use Harvest to Table as a resource for your more specific questions. I’ll continue to add more articles about gardening, but since we’re already into the season this year I wanted to give you a more comprehensive resource. Happy gardening!

In Gardening

Tired of Paying Social Security and Medicare Taxes? Here’s How You Can Opt Out.

Corey — April 13, 2010

A couple weeks ago a friend asked me how he could get out of paying Social Security taxes. He feels like there won’t be any Social Security for him when he retires, so he’d rather just save up the money himself. I had done some research on the same topic a couple years ago and I brushed up on it again recently. Here’s how you can get out of paying Social Security and Medicare taxes.

IRS Form 4029

IRS Form 4029 is an application for exemption from Social Security and Medicare taxes and a waiver of benefits from those programs. However, there are a few catches:

You must be a member of a religious group that teaches against insurance (for conscientious reasons – not because they believe it won’t be around to pay you benefits). This group must also provide a reasonable level of living for its dependent members. Finally, it must have existed continuously since December 31, 1950. It doesn’t matter if you think your group fits the description. It must be approved by the Social Security Administration. Generally, only the Amish and very conservative Mennonite groups will qualify for this specific form. I’m part of a Mennonite church and I don’t think we’d even qualify (unless the SSA knows little about the differences among Mennonites).

You’re giving up all rights to any benefits you’d be entitled to under Social Security or Medicare. So you better be ready to replace its purpose in terms of life insurance, retirement income, disability insurance, and medical insurance. While that’s no small task, my rough calculations show you’d probably be better off doing those things yourself if you’re young and make more than $30,000/year.

This exemption only applies to your self-employment earnings and earnings from employers who also qualify for this exemption. Qualifying employers will be limited to individuals, partnerships, some LLCs, and religious organizations. If you work for a corporation (C or S), this won’t do you much good. Unless, of course, you’re paid as an independent contractor and issued a Form 1099-MISC, in which case you’d be filing Schedule C and be subject to self-employment taxes.

As soon as you are no longer eligible, this exemption ends. So if you leave your religious group or if the SSA determines your group no longer qualifies, you’re back to square one. However, you can become eligible for Social Security and Medicare benefits once the exemption no longer applies.

Basically, not many people will qualify and the exemption is fairly limited (in terms of compensation affected). However, there is another form that serves a similar purpose, but it is even more limited than this one.

IRS Form 4361

IRS Form 4361 is an application for exemption from self-employment taxes for ministers, members of religious orders, and christian science practitioners. Again, there are quite a few limitations:

You must be an ordained, commissioned, or licensed minister for a church, a christian science practitioner, or a member of a religious order who has not taken a vow of poverty (like people who work for a monastery or convent but are not monks or nuns). That’s a narrow list.

You have to be conscientiously opposed or have religious beliefs that are opposed to receiving benefits from public insurance based on the performance of your duties as a minister, christian science practitioner, or member of a religious order.

This exemption only applies to your earnings in that role. If you have another job, you’ll still have to pay Social Security and Medicare taxes on those earnings and you’ll be eligible for benefits based on those earnings.

Again, this exemption is very limited in terms of who qualifies and in its scope.

The Rest of Us Will Just Have to Deal with It

There are no other ways to remain a U.S. Citizen and not pay Social Security and Medicare taxes unless you’re willing to move out of the country. But the real question is whether Social Security will actually run out of benefits by the time today’s young people retire. Everyone bases the idea that Social Security won’t be around on the intermediate projection in the 2008 Trustees Report. But you need to realize three things:

These are projections based on assumptions. There are no guarantees. People are estimating what they think will happen and running scenarios based on numerous variables. There is much room for error in these calculations.

Even under these projects, Social Security can still pay 75-78% of scheduled benefits. That’s not great news, but it’s not the end of Social Security either.

The “fixes” needed are relatively simple and not very drastic either. An increase in the Social Security tax, delay in retirement age, reduction in benefits, or a combination of all three could easily change the projections. In fact, a combination of all three solutions would probably be quite beneficial and have only a slight impact on individual situations.

With that said, I’m still not a huge proponent of the system and I’d gladly save on my own if I had the option. But Social Security was put into place partly because people don’t save on their own. If the current state of personal finances in America is any indication, we’d likely have millions of poverty-stricken elderly due to a lack of financial discipline.

In Retirement, Taxes

Can’t File Your Tax Return on Time? Get an Extension!

Corey — April 12, 2010

Maybe you don’t have all your tax documents yet, or maybe you just forgot – but if you can’t file your taxes on time there’s a simple solution. All you need to do is file for an automatic extension of your tax return.

Form 4868

IRS Form 4868 will let you apply for an automatic 6 month extension on the due date of your tax return. You must file this form by April 15, and you can file it electronically or by paper. There’s also an option to pay by credit card or debit card over the phone or online but a convenience fee will apply. Either way, you’ll still have to pay any taxes you owe by April 15. That means you’ll have to estimate your tax liability. And you’ll want to get it close to right because interest charges will apply to any unpaid portion. If you pay at least 90% of your actual tax liability by April 15, you won’t have to worry about late payment penalties.

What if You’re Out of the Country?

If you’re out of the country on April 15 and you’re a U.S. citizen or resident, you automatically get an extra 2 months to file your tax return without requesting an extension or filing Form 4868. If you still can’t file by June 15, then you’ll want to send in Form 4868 and pay any amount due by June 15.

Make Sure You Don’t Miss the Final Deadline!

If you get your due date extended by 6 months, make sure you don’t miss the October 15 deadline! There’s a 5% late filing penalty for every month you’re late up to a maximum of 25% of your amount due. If you’re two months late, you’ll be charged at least $135 or the balance due, whichever is smaller. Don’t keep putting off your tax return even if you do get the extension.

In Taxes

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