Money Pools and the $1,000 Emergency fund

I am a Dave Ramsey fan, I try to listen to his show when ever I can. One of the most common messages he teaches is to have an emergency fund of $1,000 at first and then grow it to 3-6 months worth of your household expenses.

Sarah and I currently have our $1,000 emergency fund in place, set up in a bank account separate from the ones we use for our day to day purchasing. We have found that the $1,000 fund has helped us feel more secure and has given us the ability to pay some of our bills while we wait for some of my outstanding invoices to be paid. The thing is, Sarah and I have another account as our savings account which gets added to sometimes slowly and other times quickly depending on our goals, but the thing is that this money is off limits to us. We don't touch it. What was happening though was that even though we have a good amount saved up we still felt strapped at times when our cash flow was slow because we have decided that the money in savings is OUR money and the power or gas company can't have it because we have given that money to ourselves. But sometimes we felt the pressure to dip into that savings account to pay some of our bills. Ever since setting aside the $1,000 in our emergency fund it has protected our savings account even more from ourselves and allowed us to feel more prepared to handle our fluctuating income.

I highly recommend the concept of having an emergency fund in addition to the account you are using for your savings account. I know my strategy is a little different than what Dave Ramsey teaches but it works for us.

Another thing that Sarah and I do is have little pools of money that are earmarked for certain things. For example, last year when we sold one trailer and bought another we saved most of the money we made over the cost of the cheaper new trailer, but before we put all of the money in the untouchable savings account we took a few hundred dollars and set it aside with a note on it that says "trailer money." This way when we have extra time to make repairs or improvements to the camp trailer we will have extra money to do those repairs. It seems to me that life rarely provides extra time and extra money in the same moment. So since our lifestyle doesn't allow us to store up extra time we store up a little extra money so when extra time comes along we can jump on the opportunity with our extra money in hand.

We have used the pool of money concept for things like vacation/play money, parts money for the off-road toys, and have even had a fund at times simply to be used on anything that is a good deal. Since you never know when a good deal is going to show it's face its a good idea to have some money set aside to be able to pounce on that deal before some one else does, and not have to feel bad because you had to use your grocery money to catch that great deal.

What is a good deal?

One of the reasons that I spend so much effort on getting good deals is because I feel like I work hard for my money and I have a lot of respect for the value of money and what it can do for you. So I love getting a good deal because it makes me feel like I am getting more for my money and therefore more from the time that I spend working.

So what is a good deal? What is the difference between a good deal and something that is "On Sale" and what is a "screaming good deal?" My target when trying to get a screaming good deal is 70% off or 30% of the things value. An item that is only 10-20% off of its list price is simply on sale and is nice if you are going to buy that item anyway but is not a motivating enough factor to make me want to buy it simply on the basis of it being a good deal. In order for anything to really be a good deal it has to be 30% or more off of its actual value.

Getting deals at 30% often requires a little calculated risk and the willingness to either repair or live with minor flaws or cosmetic imperfections. I guess what I'm saying is that there is usually a reason why I get it for 70% off. The camp trailer I bought late last year had some cosmetic damage, my truck I bought several years ago has 400,000 miles on it, a tool box I once bought had been dropped and needed some fixing, a truck box I bought was locked closed and had no keys.

Another way to analyize a good deal is asking yourself "If I buy this and use it for X number of years, can I sell it for the same amount or more than I am buying it for after I am done using it?" This approach is a great financial defense to the rule of depreciation. Just about everything goes down in value the older it gets. So you buy something for $1000 bucks and 5 years later when you go to sell it the thing is only worth $500 bucks and so you have spent $100 per year just to own it. So if you can get that same $1000 item for $500 and then after using it for 5 years you can still sell it for $500 then you have all the money you started with in addition to getting some use out of that money in the mean time.

YARD SALE!!!

As a kid it was a common thing to be driving around town on a Saturday doing the usual errands when from the drivers seat my father would yell "Yard Sale!!!" and jerk the wheel following that cardboard and marker sign. Even now, as I have my own family I can't seem to pass a quality cardboard sign without proclaiming triumphantly "Yard Sale!!!"

For those of you who follow Dave Ramsey you know that one of his tricks to getting out of debt is to get your "Debt Snowball" rolling is to go through the house and sell what you can at a family yard sale. I have understood the potential with this idea but really haven't utilized the concept in my own financial strategy until recently. For the past year Sarah and I have had our focus on saving money and while we have sold a couple of large ticket items to help us reach our goal we really haven't used the "yard sale" principle.

Recently though we have met our saving goal and have turned our focus toward knocking out our last non-mortgage debt, a credit card with Wells Fargo. As part of our plan to knock out this debt we have decided to start selling things on KSL to help us in our goal. I have been amazed at how successful it has been. Last month we paid more than $500 towards the card all from selling stuff and this month we have already sold $800 worth of stuff and am hoping to reach $1000 before making the payment towards the card. It feels incredible to be taking such huge chunks out of a looming credit card debt.

One other place that we have seen the Yard Sale principle be successful is with my wife's family. Sarah's family takes an annual comping trip each summer which when you add up the food, the campsites, paper goods and any other activities can come out to be a hefty amount for a large group. So we decided that we would have a combined family yard sale to accomplish 2 purposes 1 - To pay for the family camp out and 2- to help us all declutter our closets and garages. It was very successful.

My concern with this concept was "what do you do when you run out of stuff to sell or don't really have anything in the first place." My answer to that question is to just start looking around you. There are people giving stuff or throwing stuff away all the time! I can't really tell you where to go looking but I can tell you that if you start looking you will find STUFF! You will be amazed at what has value to other people and if you end up with something that is really worthless you can always just throw it away or give it away to some one else!

Let the online classifieds be your main tool. It is so easy to snap a picture and post an ad and then let it sit. I used to get worried if something I listed for sale didn't sell in a day or two but my experience has been to just try to price it right and then let it sit and I may get that one person who wants it calling me a month later.

The Greatest Secret / The Law of attraction

A few years ago I was given a copy of an audio recording of a speech given in 1956 by a man named Earl Nightingale. In this speech titled "The Strangest Secret" Mr. Nightingale lays out what he believes is the secret to wealth, prosperity, happiness and success and that secret is that "We become what we think about all day long." He said that in order to be successful we must picture in our minds what it is that we want or that we want to become and then act as if the thing we picture is real or will become real, and not want a hundred incompatible things at the same time.


More recently there has been a similar release of "The Secret" which is unaffiliated with the ideas of Earl Nightingale but have commonalities. "The Secret" teaches the power of the "Law of Attraction" which simply summarized says that we can draw things, people, and events into our lives simply by using imagery or imagining those things in our minds that we desire.

And here's my take on it all - there is with out question in my mind some real and unseen power in the practical application of these principles. The way it is taught in "The Secret" is a little extreme to me because it claims that every detail of our lives is a result of our thoughts and to me that is a bit over the top. However, the idea of seeing in our minds what we want and picturing ourselves having what we desire and feeling as though we already have it has some power in it. I personally tend to lean more towards the way it is taught by Mr. Nightingale in how he says we must only act as if the thing is real or will become real and it will be real.

As I have experienced the power of this secret I have come to describe it a little differently. I call it the "decide moment." I have been fortunate and blessed in my life to have many wonderful experiences, know great people, and have some fun things. Some of them I attribute to hard work, others to coincidence, and others to blessings from God. But there are other things that I fully and honestly believe came to me because of the power of The Secret and for each of those things I can attach to it a moment in which I "decided" that I was going to have, do, or become something. Then, with out any real effort on my part these things find their way to me.

For example I used to drive a 1968 Ford f-250 that I love and still have today, but one night while trying to maneuver that beast which I had loved for so long I said out loud with gratitude in my voice for what I had that I was ready for a new truck. I can remember almost every detail about the moment because it stands out to me as my "decide moment" that I was ready for a change. In my mind I had a picture of the truck that I wanted and it wasn't a week later that I got a phone call from my brother who had seen an incredible deal on the exact truck that I had pictured in my mind. I bought the truck and to this day have never heard of or seen a deal on a truck as good as I got that day.

The same principle was true recently when I got a call from a friend who called and said he had a dune buggy that he wanted me to buy. He had no idea that just the week before Sarah and I had decided that we were going to buy a buggy this year so that we could off road as a family with our little Zoey. I got the rail and made money in the process. This principle has also worked for me in setting and achieving goals that when I made them I thought that they sounded absurdly impossible yet time and time again Sarah and I have reached those goals and even over shot them.

Dave Ramsey, the talk show host of the most listened to personal finance radio show, often comments on how once we have decided to get out of debt or have made goals for ourselves that there is power in making that decision and that God may even step in and push the process along faster than we ever thought possible.

Call it what you want but for me its the power of decision. Decide to get out of debt, decide to save money, decide to buy your first home, decide to become a the person you want to be, decide to loose weight, decide to solve some problem, decide to change your situation. To me the decide moment is when I emotionally commit to the idea of something that I want even if I can't see the road of how I am going to get there. I just decide that it is going to be a part of my life and then I prepare myself to receive it when it comes.

There is real power in it that I can not explain and I hope that you can find it for yourself and use it in your life. I highly recommend listening to "The Strangest Secret" by Earl Nightingale.

Isn't always about the money

Too often when negotiating we get wrapped up in this mind set that the most important factor to the other person is the money. We think that when selling they are most concerned with getting as much as they can for their property or when buying that a low price is what they are after. While price is usually a major factor it isn't always the most important one.

The biggest deal I've ever done where price wasn't the main concern was when I purchased a 4 bedroom rambler in Sandy, Utah. I had purchased the house across the street previously and had become acquainted with the neighbor across the street. One evening he called me and said "Hey I want to sell my house to you." I said "OK, when are you thinking you want to sell it?" "I was thinking sometime in the next 2 days" he responded seriously. He didn't want to tell me why he needed to sell so quickly but the short of it was that he was going to loose the house in foreclosure and to make matters worse his father-in-law cosigned on the loan and he didn't want to have to tell him that he was about to have a foreclosure on his credit. I was basically able to give this family enough money for their first months rent somewhere else and take over payments on a house that had about a 30% equity position.

His MAJOR concern was 1-I need to save face with my father-in-law, 2-I need a place for my family to live. The price we agreed on was basically what he owed on the house.

The same principle was true when I was selling several big ticket items this past week. I came into several truck and trailer loads of STUFF and didn't have room for it. I sold a very nice pool table for 75% less than it was worth because I didn't have room for it. I had 18 large resturant style decorative lights that sold for as much as $300 each when new, I sold them all for $150 total! Why? Because I also needed to sell the trailer that they were being stored in and didn't have TIME or SPACE to store them.

When selling larger items in the past I have listed the item for slightly more than it was worth but then offered to deliver it. The people who take advantage of those offers are more concerned about MOVING the item than the PRICE.

Next time when negotiating remember that the other persons main concern may be time, space, convenience, sentiment, transportation, or other non monetary situations. You might find that some one will give you a better deal on their old car if they know you intend to restore it rather than enter it in a demolition derby. You might find a good deal because the wife wants it gone today, or that the person is moving tonight and can't take it with them, or many other motivating factors that have nothing to do with money.

Is that the Best You Can Do?

This past week I was checking out at The Home Depot, purchasing about $330 in flooring for one of our rentals. As I was about to slide my card the cashier asked me "Is this going to be on your Home Depot Card today?" and I replied, "Why yes it is! Are you going to give me 10% off because of it?"

"Well," she said,"I haven't done that yet today and I am feeling nice so OK!" And Just like that I saved about $35 Dollars!

One of the tricks that I have learned is to "Always ask." When I first learned this trick in my college days I actually went extreme with this idea and for practice sake I would ask for a discount everywhere I went. I quickly learned that at some stores you can get a discount nearly every time just by asking while others would put up a fight over giving a 10% discount on an empty box of Pop Tarts!

This wasn't the first time I have had this exact conversation with a Home Depot cashier except that I typically don't get the discount. So why do I continue to ask? Because every now and then it works, and its so easy. I don't make a scene, and I don't make it confrontational, I just ask. In major retail stores I find that if you get a "No" on the first go around, and if you don't have some reason (Damaged item, Bulk discount) for getting the discount you generally won't get one by trying fight it, but by just asking the cashier you might get lucky and find that it's within her power and she's feeling nice. Just this month alone I have received roughly $55 in discounts just at Home Depot just from asking the cashier.

This concept isn't mine, I got it from the book "The Five Lessons a Millionaire Taught Me" by Richard Paul Evans. In his book he tells the story of a salesmen who was trying to get a big order from one of their best clients. After presenting the offer to the client the man looked concerned and asked "Is that the best you can do?" The salesmen called his boss and got the order reduced, came back to the room and presented the new, better offer. The man again asked "Is that the best you can do?" The salesmen again left the room, called the boss and got an additional discount and returned to present the lower offer and additionally subtracted some of his commission from the offer price. Again the man asked "Is that the best you can do?" to which the salesman replied, "I'm afraid that is the best we can do." The client responded by saying "Fine, I'll sign the offer. I just wanted to make sure that it really was your best offer."

I could go on and on about how effective this one tool is but if you want to understand it more read the book starting on page 67. It's a very very good book but also a short an easy read. The point is that by always asking for a discount you will save money and likely be surprised by how often you are paying more than you need to for things you routinely buy.

Keep in mind that in trying out this tool you may have some unpleasant experiences. I have had cashiers look at me like I'm crazy and even other customers make snide comments. But I know they only comment because they are too scared to try it themselves. Just know that while it doesn't always work you can learn when it is more likely to work and use it more in those moments than in others. Try it this week and post a comment once you have saved some money!

Good things come to those who wait

Another key ingredient in getting a good deal is patience. Often times its nessicary to be prepared to find a good deal and then be patient while you look. But other times you just have to be patient while you wait for it to come in the mail.

A phrase not common among my generation is "It's more at the door" refering to the days when door to door salesmen would come to your home peddling their products. People would find later that they could have purchased the same product for less at the nearby store after the sales person was long gone. The phrase that could be coined today is "Its more in the Store" because you can almost always get it cheaper online.

This week Sarah and I both recieved packages in the mail from online purchases. Mine was a set of gears and limited slip discs for my Limited Slip Power Lok differential in my truck. The only place I could find it locally wanted $395 for it out the door. Looking for it online presented a challenge because anytime I thought I had found what I was looking for there wasn't enough information on it to make me feel confident that it would actually fit my truck. After a lot of leg work I was able to get it shipped to me for $284, which was a 29% savings.

The patience factor was that my truck was unusable for a week while I shopped and waited. It was inconvenient but to me it was worth saving that much money.

Sarah found a good deal on a new digital camera. After recieving raving reviews from her siblings who had purchased the same camera (Pentax W90) she searched online and found it for $50 less (20% off) of what walmart offered it for locally. IN ADDITION, because she bought it online she also recieved with it a free mini tripod, carrying case, screen protector and cleaning kit that she would not have recieved if she bought it in the store.

Sarah's sacrifice and patience came because we bought in online and didn't know if it would come in time to take with us on our trip to Disneyland this past week. Sure enough, it didn't, so we had to share a camera with friends.

Having patience in order to find a good deal is 180 degrees opposite the mindset and feeling that comes with impulsive buying, or telling ourselves that we need it and we need it NOW!! While Sarah and I both were very tempted to run out and make our purchases we were patient and made do with what we had and with what friends would help us with. So next time you think "I gotta have that" go home and look it up online and see how much you can save.