Debt Destruction Engineer

After Understanding Proportionality, The Debt Destruction Engine Springs Into Existence

2010-07-08T17:51:00.000-07:00

I have always had the knack, the gift really, of being able to take the circumstances that I find myself in and somehow find a way to gain some advantage therein. I can sometimes take a problem and turn it inside out and find an advantage hiding in there somewhere.

I have previously described the moment in the wee hours of a winter morning in 1979 when I looked at our bills and discovered the principle of proportionality. I then began to experiment a little further to see if there might be a way to find an advantage residing in the disadvantage of just barely having enough money to pay bills.

I reasoned, "We have to live on $75 a week, which is tough. If we can live on just $75 a week, could we not then also live on just $70 a week? What if I take a measly $5 a week and add it to the smallest bill until this bill is paid off?

Then take the $20 a month ($5 a week) and add it and the money that was being paid on the smallest bill to the 2nd smallest bill?

After this 2nd smallest bill is paid off, I take the previous total amount that was being paid on the 2nd smallest bill (the original $20 + the money that was paid on the smallest bill + the money that was paid on the 2nd smallest bill) and add it to what I pay on the 3rd smallest bill."

I projected this forward and found that this approach would pay off all the bills including the mortgage in LESS THAN 5 YEARS! (Our mortgage began years earlier with just a $14,500 balance. Remember, this was 1979.) It was 4 years and some number of months. As I look back now through the foggy mists of eons of time, I cannot remember if it was 4 years and 7 months, or 9 months, or 10 months, or whatever, but it was definitely less than 5 years.

Now, please note that, at the time, I knew nothing about the Weenie Tax or LEX Cash or Fluff or Temporary Extreme Measures or Inherent Momentum, all the things I talk about in my books and articles. I did not figure out these strategies until several years later. We would have to do this with old fashion discipline and sacrifice. We had to pay $175 a week on bills anyway, every week, without fail, no matter how difficult that would be. So in the beginning it became a hunt for $5 a week.

If we could just do what we had to do every week anyway and scrape up a measly $5 to add to our bill paying each week, we could be debt free in less than 60 months. Please note that it would only take $20 a month because our income was low and hence our debt was also relatively low so that $20 was a lot of extra fuel.

By the way, today there are at least 20 other individuals and organizations in America teaching essentially the same strategy. (One of these is http://www.FaithLifeNow.com which is a Christian financial ministry website. I am not an affiliate marketer for these guys and I mention them only because I believe they could help you understand your debt relief possibilities. They state that 90% of families can be out of debt, including the mortgage, in 5 to 7 years.)

Please do not just dismiss this. It works. It is hard, but it does work over time. You might get this strategy going and it may very well collapse because anything you do can and sometimes does fail. Just crank it up again and go after debt relief freedom with this approach until you achieve success. Even if it took you 2 or 3 shots at this to pull it off, it would be well worth it to make this transition.

Several years after that winter morning in 1979, I came to call this strategy the Extra Fuel Version of the Debt Destruction Engine. The debt-destroying process moves like an old time steam driven locomotive, ponderously slow at first, then eventually building great momentum. The extra money applied to debt destruction is like additional fuel, extra wood or coal, thrown into the burner to stoke the boiler.

There are 2 other versions of the Debt Destruction Engine called (1) Inherent Momentum and (2) Inherent Momentum with Extra Fuel. These other versions destroy debt even faster than the Extra Fuel Version. All 3 forms of the Debt Destruction Engine are explained in "Your Wealth is Hidden in the Fragments of your Life" and in "The Debt Destruction Engine", available at the Debt Free Relief website shown below.

Request a free copy of one or both of these books on debt destruction. I will not put you on a mailing list nor will I call. You will just get the book(s) sent to you attached to an email and you will never hear from me again unless you specifically ask me to contact you.

http://www.DebtFreeRelief.net Deal debt a deadly blow today.

Debt Free Relief Starts by Understanding Proportionality

2010-07-07T23:19:00.000-07:00

I started thinking about how to achieve debt free relief over 30 years ago. One Sunday morning at 2:30 AM in the winter of 1979, I was looking at our bills trying to figure out how to find a way to gain some control over a disorganized mess. We had been practicing the financial discipline of Congress and the stick-to-it-ness of a salted leech. Our take home pay was only $1,000 a month with both of us working. Our bills came to about $700 a month. We were both paid weekly, but most of our bills were due in the 3rd and 4th weeks.

We were sailing along spending most of our money in the first and second weeks and then did not have the money to pay all the bills. I know this sounds stupid, but it is a problem that a lot of couples have when they first start out. Since our bills were $700 and we had only $1,000 coming in, I realized that we had to live on $75 every week.

$1,000 (Take home pay) - $700 (Monthly bills) = $300 (To live on for a month)

$300 divided by 4 = $75 (To live on for the week)

We were a real high-income power couple, obviously. Seriously, even such a low-income situation can serve to illustrate some basic concepts.

This meant that we had to pay $175 a week ($700 in monthly bills divided by 4 = $175) on bills as regular as clockwork. There was no choice in the matter. If we paid less than $175 in a particular week, we would fall behind.

If we paid just $100 in the first week, for example, we would have $600 of bills left to pay in the 3 remaining weeks. We would then have to pay $200 a week in the last 3 weeks of the month.

$250 (weekly take home pay) - $200 (bills paid per week) = $50 (a week to live on)

It was hard to live on $75 a week even as far back as 1979. But it was really tough to live on $50 a week.

Since 1/4 of our take home pay came in every week, we had to pay at least 1/4 of our monthly bills every week. This had to be done without exception. This is proportionality.

Suppose there is a couple and both work. One of them is paid once a week and the other is paid every 2 weeks. Their income is just enough to pay the monthly bills with very little left over.

The first week 18% of the monthly take home pay comes in.
The second week 32% of the monthly take home pay comes in.
The third week 18% of the monthly take home pay comes in.
The fourth week 32% of the monthly take home pay comes in.

Since their income is just enough to pay bills with very little left, this couple would have to pay:

18% of the monthly bills in the first week,
32% of the monthly bills in the second week,
18% of the monthly bills in the third week,
32% of the monthly bills in the fourth week.

This is proportionality and this is not even a strategy to get ahead or attack debt in any way. The bills must be paid in this ratio or this couple will fall behind. There is no choice in the matter. It is important, especially for lower income folks, to understand proportionality.

After understanding proportionality, it is possible to move on to bigger and better things, such as true debt free relief by destroying all debt, as you will see in an upcoming post.

http://www.DebtFreeRelief.net

Wealth Building Power Strategy - The Walk Up

2008-08-30T16:05:00.000-07:00

When you get a raise of 1 %, increase withholding 0 %.

When you get a raise of 2 %, increase withholding 1 %.

When you get a raise of 3 %, increase withholding 1 %.

When you get a raise of 4 %, increase withholding 2 %.

When you get a raise of 5 %, increase withholding 2 %.

When you get a raise of 6 %, increase withholding 3 %.

When you get a raise of 7 %, increase withholding 3 %.

When you get a raise of 8 %, increase withholding 4 %.

When you get a raise of 9 %, increase withholding 4 %.

When you get a raise of 10 %, increase withholding 5 % and so on.

What does this do for you?

You still get more take home pay every time you get a raise.

The money you invest is never in your hands, so you never have to exercise will power to make yourself invest it.

You painlessly walk your 401(k) withholding up to the maximum allowed.

Then, you open an IRA and follow the same “walk up” approach every time you get a raise until your yearly contributions to your IRA are at the maximum level allowed. Edward Jones, Charles Schwab, and other brokerage operators can help you set this up when the time comes.

Then, you set up other retirement accounts after allowed contributions to the IRA are maxed out. You may be permitted to contribute up to a certain amount in other accounts. The contributions each year will probably not be exempt from taxes in that particular year, but the growth of these accounts over the years should be tax free. The law and the contribution limits change on this from time to time. Edward Jones, Schwab, and others can advise you on this. After maxing the 401(k) and IRA contributions, you employ the same painless “walk up” method with every raise until you max out contributions to these other retirement accounts as well.

After maxing out all of your retirement contributions in a few years, you then, with every raise, “walk up” deposits to after-tax accounts, “buy” and “do” accounts, such as mutual funds, so you become a cash-on-the-barrel guy or gal instead of a credit-card-on-the-counter guy or gal.

You, in a sense, do have to exercise discipline whenever you get a raise to make yourself increase contributions in the “walk up” manner shown above, but you also do not have to exercise discipline moment by moment, week by week, month by month, in order to force yourself to make deposits into investment accounts. As long as you are faithful to the “walk up” when you get a raise, the wealth building deposits are automatic the rest of the time.

http://www.HushDoNotTell.com The impossible is made possible! Hold a standard size piece of copy paper up to your chest and you will see that it is not as wide as you are. When you request the free book by going to this website, you will learn how cut a hole in this sheet of paper and pass your body through it without tearing it. You will also learn how to destroy your debt with the money you already make.

Wealth Building Power Strategy - Plummeting to Prosperity

2008-08-30T15:23:00.000-07:00

There are certain areas all over the United States or any industrialized nation that are economically depressed. Some of these locales are in breathtakingly beautiful regions. Because of their economic woes, the people in these areas make every effort to improve the recreational resources of the region in order to attract sportsmen and vacationers. They float bond issues and obtain federal grants for this purpose. The efforts applied may have not yet worked their economic magic, but the result is a beautiful area in which to retire with a very low cost of living. Many of these low-cost-of-living areas are recreational paradises with nice golf courses, tennis facilities, boat docks, hunting lodges, lakes developed with fishing and water skiing opportunities, and the most amazingly beautiful scenery.

This is an example of a problem that is also an opportunity. Economic distress of such an area is a problem for those who have always lived there, but it is an opportunity for the person who is trying to accumulate the resources to retire. Prices tend to chase the amount of money circulating in an area so these regions have low costs of living. Property taxes are lower because property values are lower and tax rates are lower. The cost of auto insurance, based partially on the number of accidents per capita in a region, tend to be lower in one of these areas. Houses can be purchased for a fraction of the cost for the same house in a booming area. The equity in your existing house may be enough to buy a house like it for cash with money left over. Imagine that you then pay off your car loan and the two largest components of your debt are gone!

You can retire in such a place with less money than required elsewhere. You may be able to build your retirement nest egg much quicker simply because you need a lot less money to live. This is a way to go up by going down. Ask for assistance in any good library or large bookstore and you will find several books about retirement locations. These books deal with the cost of living and every other factor you would need to consider in deciding on a place to retire. One such book I found, for the USA only, is “Retirement Places Rated” by David Savageau.

There is an emotional cost to "plummeting to prosperity" that most of us are probably unwilling to pay. A beautiful, low cost retirement area may be far away from beloved friends, children, and grand children. (Of course, the children are probably not ever going to come see you anyway.) You may forfeit the social contacts you have cultivated for several decades in order to "plummet to prosperity". It is, nevertheless, an option to consider as you build your retirement plan. If it is so late in the day for you that your situation (as to preparing for retirement) is desperate, you may decide that you have no choice and must "plummet" even with the emotional cost.

This low cost retirement area might even be the very county in which you grew up. Millions of folks long to get away and go to the big city to seek their fortune. The economic vacuum left causes a region to be financially depressed and this produces a low cost of living and low property values. Then later in life, the same people sometimes long to live in that same place they were so desperate to escape when they were young. It is one of the ironies of life.

http://www.HushDoNotTell.com Impossible made possible! Hold a standard size sheet of copy paper up to your chest and see that it is not as wide as you are. Yet I will show you how to cut a hole in that piece of paper and pass your body through the hole without tearing it. If you understand the feat I am describing, you would have to agree that this is seemingly impossible. This simply shows that there are things that seem impossible that can be done with the right information. I will also show you how to destroy your debt in a surprisingly short period of time with the money you already make.

Wealth Building Power Strategy - Guaranteed High Return

2008-08-30T15:03:00.000-07:00

There is a way to lock in a high rate of return that is 100% guaranteed. If you have a credit card, store revolving account, or finance company account that charges high interest, you can “invest” in this account and receive a guaranteed high rate of return. If you are paying 18% interest, you are being hurt and are experiencing a return of – 18% (negative 18%). Your hole, that you are digging, is getting 1 ½% (18% divided by 12) deeper every month.

When you pay extra amounts that reverse this damage by reducing the principle, you are gaining at the same rate of return. If you have an account that charges 22%, you can get a guaranteed rate of return of 22% by paying extra amounts into it. The only way to kill the Debt Dragon is to feed it to death. You stuff it with the junk food it enjoys until you manage to force that last Ding Dong into its mouth and it explodes. Give your self a guaranteed high rate of return by investing in the destruction of your debt.

In fact, the return, if you look at it a certain way, can be even higher than the stated interest charged. If I have an account with a stated rate of 22.9% and I owe just $1830 and I pay an average of $122 a month, I pay 12 X $122 = $1464 a year. $1464 divided by $1830 = 80%. If I paid $1830 to pay off this balance, I would have 80% of that amount a year in extra money to spend or invest. If I can find a way to destroy this debt quickly in a few months, the money I put into its demise will give me a “return” of 80%. (I know I’ll get letters about this. Come on, guys. We’re just having some fun.)

If I have an account with a stated rate of 23% and payments that will average $160 a month and I owe $6880, the “return” for the extra money I put into attacking it is actually 27.9%. (12 X $160 = $1920 divided by $6880 = .279) I am benefited at this rate for every extra dollar I put into eliminating this debt.

http://EzineArticles.com?expert=David_Unger Articles on building wealth and destroying debt.

The Secret Weekly Meeting

2008-08-22T19:56:00.000-07:00

This is Why You Need an Emergency Fund

Once a week at 3:00 AM, there is a secret meeting.

The car, the fridge, the stove, the cat,

The roof, the sinks, the thermostat,

All give the secret greeting:

“Down, down,

We break down

At just the perfect moment.

We meet to scheme,

To our owners bring

The utmost trial and torment.”

Every appliance, machine,

Animal and thing,

That you have in your life,

Will here attend

To plan to send

To you the greatest strife.

TV No. 2: “What if we have the cat get sick…..”

Dishwasher: “And the roof to start to leak?”

Roof: “The fridge quit…..”

DVD Player No.1: “The foundation split…..”

Car: “And all this in one week?”

Central A/C: “No, no, if you recall, we did all that last year.”

Toilet Bowl: “If we repeat, then our deceit might to them be clear.”

Hamster: “Could we, perhaps, have the car, mayhaps, run into the cat?”

Cat: “No, we can’t because I ain’t willing to do that!”

They hash it out

And thrash it out

And write it on a chart.

THE OVEN SMOKES.

THE SEWER CHOKES.

THE DRYER SHOOTS OUT SPARKS.

THE LAWNMOWER QUITS.

THE HAMSTER GETS SICK

WITH A MURMUR IN HIS HEART.

Just before sunrise

They all arise

To end the weekly meeting.

TV No.1: “Good work tonight!”

Fridge: “Good plan! Just right!”

Central A/C: “Let’s close with the secret greeting.”

“Down, down,

We break down

At just the perfect moment.

We meet to scheme,

To our owners bring

The utmost trial and torment.”

Here you are thinking that if you can just make it to 2020 without any new problems, then you will be alright. 2020? There are 5 major disasters already planned for next week!

http://www.HushDoNotTell.com Learn how to set up an Emergency Fund and destroy all of your debt.

Your Wealth is Hidden in the Fragments of your Life: Part 10

2008-08-15T14:51:00.000-07:00

This is the 10^th in a series of 10 “fragments” articles. Let’s find the “fluff” and use it to beat our bills to death!

I have noticed that there are at least 7 other individuals or organizations scattered throughout North America that are teaching about the debt destruction engine, although they do not call it the same thing. Since I discovered the debt destruction engine in 1979, I have heard of John Cummuta’s “sequential debt elimination system,” the “Debt Doctor,” the “Debt Wizard,” and Dani Johnson’s teaching on debt destruction, to name a few. I just mention this so you can see that this is not just the bizarre idea of one weirdo speaking out of obscurity. There are confirming voices out there.

I was flipping through TV channels, as the male of the species is wont to do, when I came upon Dani Johnson standing in front of a chalkboard, drawing on it, teaching on the Benny Hinn program. “You watch,” I said to myself. “I bet she is going to talk about the debt destruction engine.” Sure enough, that was where the discussion was headed. She mentioned something she called “fluff.” You realize that you buy a shirt, a pair of shoes, a blouse, a pair of pants, on an impulse, several times a month at Wal-mart or elsewhere. When you get home, you sometimes find the same article that you just bought hanging in your closet. You have adequate clothing for you and your family, but just constantly add to the wardrobe impulsively.

You realize that you have enough groceries in your pantry to live for a month. You could just not buy groceries this month, except for bread, milk, and such, here and there. You identify unnecessary spending, duplicate purchases you make all the time of items that you already have in your bathroom, bedroom, kitchen, and all through the house. This is “fluff” that you could just cut out. Dani Johnson said that some people have told her that they have found as much as $500 of fluff in one month.

What if your smallest bill had a balance of $500 or less? You could wipe out that bill in one month with a fluff attack. Then, imagine the possibilities if you further reduce your living expenses with the LEX Cash strategies we talk about in another article, you cut out the survival crutches, and you change your income tax withholding so that you took your income tax refund throughout the year.

Fluff + LEX Cash (Reduced Living Expenses) + Cut Out Survival Crutches + Change Tax Withholding = All Out Fluff Attack

God asked Moses, “What is that in thine hand?” There is great potential power in knowing what you have in your hand, whether it is a rod such as Moses held or the control of monthly finances that you hold. What is that in your hand? Could it amount to $300, $400, $500, $600, or more? Could you wipe out your smallest bill in one month? Could you destroy your second smallest bill in just 2 more months? Could you obliterate your credit cards, store revolving accounts, and finance company accounts in 21 months, 18 months, 15 months, or less with an all out, insane, going-for-the-jugular, fluff attack?

Then further imagine the possibilities if you become completely radical in this assault by such things as cutting out your cable television, cancelling magazine subscriptions, cancelling gym memberships, stopping visits to Starbucks, cancelling book club memberships, stopping rentals of movies, cancelling DVD club memberships, cancelling newspaper subscriptions, buying MagicJack so you never pay a local or long distance phone bill again for the US and Canada, not feeding the vending machines during breaks at work, and not paying someone else to detail your car or change your oil. You cut out all things extraneous and apply this bonanza to killing bills. Remember, this is just temporary, not permanent. You only do this until the enemy is vanquished and the good guys win.

A Fragment that is Necessary for Your Success

There are 3 books, a mere “fragment” of a library, which I recommend you read so as to equip yourself to find the fragments of wealth hidden in your life. Please read:

“The Wealthy Barber” by David Chilton,

“24 Essential Lessons for Investment Success” by William J. O’Neil,

“Wealth without Risk by Charles S. Givens”.

Please forgive me folks, but I must once again give the following warning.

Do not, I repeat, do not just "haul off" and cancel your life insurance coverage!!!!!!! Read chapter 5 of "The Wealthy Barber," talk to several knowledgeable advisers about life insurance, and make sure you understand what it is that you are going to do.!!!!!

If you decide that you want to replace your whole life insurance or universal life insurance with a term life insurance policy:

Obtain the term life insurance policy from a company with a solid financial rating in the appropriate amount as explained in "The Wealthy Barber" and have the documentation in hand that proves that the insurance on you is in force

Before

You cancel the old whole life policy or cancel the old universal life policy!!!!!!!!!!!

The 3 books I recommend should be taught in our schools. These give a solid education that everyone needs to achieve financial independence. “Wealth without Risk” was published in the 1980’s and some of the data in it is out of date, but a great many things that I mention in my articles will click when you read Givens’ book. A light will go on in your attic, for sure, I promise you.

I know we get weary with the heavy load of information that is thrown at us today, but can you, one more time, dare to believe and dare to invest in …yourself? Can you dare to invest your time in reading 3 books that will help you transform yourself from a leaf floating on the river of life with no control, no destiny, into someone who knows where she or he is going and knows how to get there?

Come on! Reading 3 books won’t kill you!

OK, if you’re a guy, it might kill you, but isn’t it worth the risk?

Take a shot at believing you can do something with your life.

Do not let the prairie chickens tell you that you are not an eagle.

Be an eagle! Bolt up out of the prairie chicken world and soar high!

http://www.HushDoNotTell.com Destroy your debt with the money you already make.

Your Wealth is Hidden in the Fragments of your Life: Part 9

2008-08-15T14:35:00.000-07:00

This is the 9^th in a series of 10 “fragments” articles. Now we get down to some serious slaughter. Let’s kill some bills!

If you are a typical citizen of an industrialized nation, your life is a Debt Induction Engine. In the Western World, we tend to view our income as a mold into which we pour our lifestyle. After we fill the mold completely full to the very brim, we crave an even more expansive lifestyle and hock our future to obtain it. As you operate your financial life, it just naturally induces debt. It is like a steam driven locomotive. The engine takes off ponderously slow very gradually gaining speed and momentum. As it runs over the years, you become bound with increasingly greater amounts of debt.

In this article, you are going to learn how to transform your Debt Induction Engine into a Debt Destruction Engine. As this debt-destroying locomotive operates, it moves forward with aggravating slowness. At first, this engine destroys debt at such a snail’s pace that it is hard to find the will to keep it running. It may take the first ³/₄ of the total time the locomotive runs to destroy the first ¹/₄ of your debt. Then it finally achieves enough momentum in the last ¹/₄ of the total time the locomotive runs to destroy the last ³/₄ of your debt. This process is called a Debt Destruction Engine because it starts slow and builds momentum just like an old-time steam driven locomotive until it finally achieves great power and speed.

Just below, we see 8 time payment accounts that do not include vehicle loans or the mortgage. There are 4 credit cards, 2 finance company loans, and 2 store revolving accounts.

Bill 1---Bill 2---Bill 3---Bill 4---Bill 5---Bill 6---Bill 7---Bill 8

To start the Debt Destruction Engine, we add “extra fuel”, which is like adding wood or coal to stoke the locomotive’s “boiler”, every month by paying an extra $25 on the target bill, which is Bill 1, until it is paid off.

Pay Bill 1 plus $25 Extra Fuel also applied to Bill 1.

Pay just required payments on Bill 2, Bill 3, Bill 4, Bill 5, Bill 6, Bill 7, and Bill 8.

The Debt Destruction Engine starts out with wheels spinning, fighting for traction, barely moving. After Bill 1 is finally paid off, add the same “extra fuel” plus the amount you were paying on Bill 1 to the new target bill, which is Bill 2, until it is paid off.

Pay Bill 2 plus amount that was paid on Bill 1 plus $25 Extra Fuel, all applied to Bill 2.

Pay just required payments on Bill 3, Bill 4, Bill 5, Bill 6, Bill 7, and Bill 8.

When Bill 2 is paid off, add the “extra fuel” plus the amount that was paid on Bill 1 plus the amount that was paid on Bill 2 to the new target bill, which would then be Bill 3.

Pay Bill 3 plus amount that was paid on Bill 1 plus amount that was paid on Bill 2 plus $25 Extra Fuel, all applied to Bill 3.

Pay just the required payments on Bill 4, Bill 5, Bill 6, Bill 7, and Bill 8.

As each target bill is paid off, add the total amount that was being paid on the previous target bill to the new target bill. Keep doing this until all 8 accounts are destroyed. The larger the “extra fuel” is at the beginning, the faster the process of debt destruction. This extra fuel version of the Debt Destruction Engine with only $25 of “extra fuel” could take as long as 5 years to destroy this group of accounts.

Your usual time payment accounts (not including here the vehicle loans and the mortgage) can be destroyed in from 2 years to 5 years depending on the size and nature of your debt with this “extra fuel” attack. This version of the Debt Destruction Engine is slower than 2 other versions of the Debt Destruction Engine: Inherent Momentum and Inherent Momentum with Extra Fuel.

Inherent Momentum

Debt can be destroyed without adding “extra fuel” to the Debt Destruction Engine. Debt has a powerful residual inertia that can be focused against itself. This form of the Debt Destruction Engine operates even faster than its extra fuel cousin as it annihilates debt with its own inherent momentum.

We will use the example of the same 8 accounts that were employed in the previous discussion. The total of all the required payments is $1,300. We do not add “extra fuel”. We apply the same block payment of $1,300 until the 8 accounts are destroyed.

1^st Month

The total of all the payments is $1,300 in the 1^st month. We start by just paying the required payments on each of the 8 accounts.

2^nd Month

The total of all the required payments is $1,296 in the 2^nd month. The credit card and store revolving account balances have declined ever so slightly which causes the required minimum payments on these accounts to go down just a tiny bit.

In this 2^nd month, you subtract the total required payments of $1,296 from the block payment you started with of $1,300 and you get $4. You add this $4 to the target bill, which is Bill 1.

So, in this 2^nd month, you pay just the required minimum payment on each of Bills 2 through 8. On Bill 1, you pay the required minimum payment plus $4.

In the very beginning, Inherent Momentum moves slower than the Extra Fuel Version of the Debt Destruction Engine. Inherent Momentum catches up quickly, as you will see, and then runs far ahead.

3^rd Month

In the 3^rd month, the total of all the required payments is $1,291. When you figure this, you get $1,300 - $1,291 = $9.

You pay the required payments on Bills 2 through 8. On Bill 1, you pay the required payment plus $9.

12^th Month

In the 12^th month, the total of all the required payments is $1,210. $1,300 - $1,210 = $90.

You pay the required minimum payments on the bills other than the target bill.

On the target bill, you pay the required minimum payment plus $90.

24^th Month

In the 24^th month, the total of all the required payments is $900.

$1,300 - $900 = $400.

You pay the required payments on the bills other than the target bill.

On the target bill, you pay the required payment plus $400.

36^th Month

In the 36^th month, the total of all the required payments is $450.

$1,300 - $450 = $850.

You pay the required payments on the bills other than the target bill.

On the target bill, you pay the required payment plus $850.

42^nd Month

By the 42^nd month, the 8 accounts are totally destroyed.

When you see how this works and see the TV ads for credit counseling services, you realize that these folks are using Inherent Momentum. They talk about a single block payment as in the example we just discussed. These “services” are doing what you could do yourself.

There is an inherent momentum that just naturally resides in debt itself. As long as there are no new purchases on these accounts, the total of all the required payments will constantly and relentlessly diminish. You continue to apply the total “block amount” that you employed at the beginning. You subtract the total of all the required payments from this block amount and apply the difference to the target bill every month.

You can destroy your debt without any extra fuel. Your debt will implode on itself with the weight and power of its own inherent momentum. This version of the Debt Destruction Engine works especially well for those with a lot of credit card and store revolving account debt.

Inherent Momentum with Extra Fuel

In this variation of the Debt Destruction Engine, we simply add “extra fuel” to the block payment at the beginning. If the total of all the required payments is $1,300 and we add $25 of extra fuel, then we start with a block payment of $1,325.

In the 1^st month, you pay the required minimum payments on each of Bills 2 through 8.

On Bill 1, you pay the required payment plus $25.

In the 2^nd month, the total of all the required payments is $1,291.

$1,325 - $1,291 = $34.

On Bills 2 through 8, you pay the required payments.

On Bill 1, you pay the required payment plus $34.

Each month, you add up all the required payments to get a total. You subtract this amount from the beginning block amount. You then add this difference to the required payment on the target bill. On the other bills, you pay just the required minimum payments. You are simply using a higher block payment and this causes debt to be destroyed even faster.

3 Types Of The Debt Destruction Engine You Can Run

Type 1 has Credit Cards, Finance Co. Accts., Store Revolving Accts.

Type 2 has Credit Cards, Finance Co. Accts., Store Revolving Accts., Vehicle Loans

Type 3 has Credit Cards, Finance Co. Accts., Store Revolving Accts., Vehicle Loans, Mortgage

3 Versions Of The Debt Destruction Engine You Can Run

Extra Fuel

Type 1 with Extra Fuel Version takes 2 to 4 years.

Type 2 with Extra Fuel Version takes 3 to 5 years.

Type 3 with Extra Fuel Version takes 5 to 10 years.

Inherent Momentum

Type 1 with Inherent Momentum takes 1¹/₂ to 3¹/₂ years.

Type 2 with Inherent Momentum takes 2¹/₂ to 4¹/₂ years.

Type 3 with Inherent Momentum takes 4¹/₂ to 9¹/₂ years.

Inherent Momentum with Extra Fuel

Type 1 with Inherent Momentum with Extra Fuel takes 1 to 3 years.

Type 2 with Inherent Momentum with Extra Fuel takes 2 to 4 years.

Type 3 with Inherent Momentum with Extra Fuel takes 4 to 9 years.

Your Wealth is Hidden in the Fragments of your Life: Part 8

2008-08-15T14:17:00.000-07:00

This is the 8^th in a series of 10 “fragments” articles. We will need all the fragments we can find here so we can stock up our Emergency Fund and pile up all the ammunition we can get so we can do some serious bill killing in the last 2 articles.

Higher income folks can usually just cut out the survival crutches, described in a previous article, and find enough money to invest and attack debt. Lower income families may not have as many survival crutches to cut out because they just flat do not have the money to "rent" these crutches. Lower income families and individuals then may need another place to find cash to invest and/or attack debt. This place is LEX Cash (Living Expense Cash), which is money freed up by reducing living expenses.

The LEX Cash strategies that I give are all optional. Choose most or some or none. Build your own Lex Cash approach with these ideas or others far more brilliant that you come up with. These suggestions also help you live on cash and avoid taking on new credit.

Run several layaways throughout the year for Christmas and other special days. For example, you could run a layaway in February and March, one in April and May, another in June and July, yet another in August and September, and a final layaway in October and November. You budget this expense through the whole year and avoid using credit at the last minute.

Try generic grocery equivalents. Some are good. Some are bad. Chew the good. Eschew the bad.

Try generic over-the-counter drugs. These have exactly the same ingredients as brand names and cost several dollars less. You can also ask your doctor for the generic equivalent when she/he writes a prescription.

Use coupons. My wife has transformed herself from a very bad grocery shopper to a very good grocery shopper by focusing on coupons, generics, sales, and other clever tricks she has discovered. She is, I believe, the best grocery shopper on the planet and could give seminars on skillful shopping. She miraculously changed herself from worst to first in this category. My Dad told me how much he spent for groceries and my wife spends less per person now than my father did in the 1960's. And this is not using the dollar's value in terms of the 60's purchasing power and allowing for inflation. This is in terms of actual dollar amounts then in the 60's and now! She is the Master Shopper of the Universe.

Buy used appliances that have been reconditioned such as washers and dryers. They usually look and run like new. Look in the phone book and you will probably find several of these shops where you live. They will usually deliver and install it for you. The previous washing machine we had cost $85 and lasted for 7 years. I did repair it one time with a part that cost $48. The total cost of the machine for the 7 years then was $133. We just bought another one for $100. The price went up $15 from $85 to $100 in 7 years. That blankety blank inflation!! I could have repaired the old one with a $45 part and got another 3 to 4 years out of it. We generally get 10 to 12 years out of one of these used machines. I just got lazy and bought another one.

Repair your own appliances, when possible, by consulting a do-it-yourself appliance repair shop. There is a do-it-yourself parts house in Dallas called “Adam the Answerman” with a lady on staff that can tell you how to fix anything from central air conditioning to the refrigerator to the washing machine. There are shops like this in every major metropolitan area. I am Mr. Badwrench, but I have repaired our appliances on numerous occasions. There are other times that I blow it off and let someone else do it. As I get older, the "blowing it off" happens much more than in the past.

Consult with repair nuts. There are people in your community, who happen to be skilled at repairing certain things. One, for example, may be able to replace a car's broken windshield as well as a professional shop for far less than you would normally pay. You have to be careful because sometimes these nuts really are nuts. You find them by putting out feelers and just asking around. You develop the discernment to distinguish between the repair nut and the real nut. Some shade tree mechanics can actually only repair trees.

Get a debit card and transform your credit card habit into a debit card habit. Here is a helpful tip. When you pay with the debit card at the gas station, push the "credit card" button. If you press the debit card button, a larger amount than your actual purchase is often held. If your balance is running low in your checking account, this hold can cause problems for you. Press the button as if your debit card is a credit card and just run the card through the reader like normal. I have never had a problem doing this. The actual amount of the purchase is taken from your account with no additional amount held.

Buy from discount businesses (grocers, clothing stores, miscellaneous sundry stores like Dollar General, furniture stores, gas stations). Virtually everything is sold in some kind of discount venue. Big-ticket discount venues like "furniture barns" have layaway plans.

Brown bag lunches for work.

Do your own minor maintenance on your car such as oil changes and detailing. A regular oil change religiously done right on schedule without ever missing one, whether you do it or have it done, is one of the most important items in your wealth building plan. You want to drive that sucker as long as you can before you have to buy another one.

Do your own minor repair jobs around the house such as fixing plumbing problems. The discount home improvement shops have people who can tell you how to repair anything. You may have to grab one of them to get their attention and make them listen to you. After you do, they can explain how to do any home repair.

Do your own laundry if you have been having this done by someone else.

Drive a used car. The wealth transfer that takes place while paying for a car from a new car dealership is staggering. I have made the mistake of letting my cars get too old. The two cars we drove once were 14 and 15 years old. We had just started living the way I describe in this article. Everything ran well for 2 ¹/₂ years until both cars broke down at the same time and each one needed a new engine. Ideally, the used cars should be from perhaps 5 to 9 years old. You can buy a repo or late model used car at an auction. This can be tricky. I have never done the auction thing myself, but have heard of others who do this successfully. Get a knowledgeable mechanic, friend, or relative who is a good judge of horseflesh to go with you.

Find an honest mechanic. Next to doing regular oil changes, this can be the most important aspect of low cost living. I have found one honest mechanic in my life. He tells me exactly what is wrong and tells me how to fix it myself. He tells me what parts to buy and gives a step by step description of how to do the repair. If it is something I do not want to mess with, I let him do it. This gentleman's shop is, unfortunately, only involved in front end repair, tires, brakes, and related work. I am still looking for an engine mechanic and a transmission repair shop that I feel like I can trust. (See! Even though I am writing this article, it is not like I have arrived nor have it all together! But, Buddy Bubba, I'm gettin' there!)

Cut back on the Blockbuster expense. Rent movies less often than before. Most of us have a large collection of movies at home to watch. I know we are getting kind of Spartanesque here, but hang with me for a moment. Imagine that you are doing a debt destruction engine that does not include the vehicle(s) or the mortgage. This smaller version of the debt destroying locomotive is aimed at the credit cards, the finance company accounts, and store revolving accounts. You can take it really easy and knock it out in 5 years or go after it in a gung-ho fashion and kill it in 4 years.

With a little bit of "Blockbuster Restraint", you might annihilate it in 3 years or even less. You still rent movies, but just not as often. You still go to the favorite burger joint, but not as many times a month as in the past. You still take the family to Braums or your favorite ice cream parlor occasionally, but just not as often as in the past. You still frequent the favorite restaurant, but just not as frequently. Some nights, you stay home, when you would have gone out in the past, and grill burgers in the back yard, watch movies that you already have, and have ice cream from your freezer.

You cut back on the "convenience factor" of your life ever so briefly to obliterate this portion of your debt in 36 months or perhaps even as little as 24 months. The "sacrifice" of "Blockbuster Restraint" is not unbearable because it is short lived and produces a clear and wonderful objective.

Do whatever it takes to stop the "Reciprocation Contest" aspect of Christmas. When you are standing by my graveside at my funeral or I am sitting in that chair by the coffin at your graveside at your funeral, are we going to remember or even care who gave whom what? In the overall galactic scheme of things, does it matter if my pride is damaged because I give you something that cost $30 and you give me something that cost $60?

For the last few Christmases, we have done away with the Reciprocation Contest aspect of the Yuletide gathering with my father, stepmother, and my brothers and sisters. At a recent Unger Family Christmas, everyone brought just one gift for $5 for a round robin gift exchange. Then we had a craft-making party using kits obtained from the Oriental Trading Company (www.orientaltradingcompany.com). The parts for the craft projects had been punched out and were put together in plastic sandwich bags as little craft kits. You could make really neat Christmas ornaments by gluing the pieces together and there were several different kits to choose from.

I know this sounds lame to older kids and men, but it really was a lot of fun even for the older kids and men. You had the usual bit of the men being mostly klutzes with hilarious results. There were the mishaps of fingers glued together, some of the kits being put together upside down and inside out, one finished craft glued to another, and hands being hot glued to the table! Then in another year, we chipped in to a gift fund that supplied one gift for everyone at $3 to $5 each and had another round robin gift exchange. We did the same craft-making session and the older kids and men were actually looking forward to it! We had non-traditional food that was easy and inexpensive to fix at both parties. The cost on both of these parties was miniscule and my stepmother has said she had more fun in those two Christmas gatherings than any others in the 18 years she had been in the family.

Another Christmas approach is to "draw names" with each family group and buy just one gift for one person in each family group and set a low dollar limit, rather than buying something for everyone and worrying about matching each others generosity. With some thought, the hard feelings and pride issues of gift giving during the holiday season can be eliminated. This helps everyone to avoid a debt load from shopping and makes the time together more focused on enjoying each other.

Barter your skill to obtain a needed skill. You repair air conditioners, but are a schmuck under the hood. Clyde is a world class auto engine mechanic, but does not know an evaporator from a condenser. You give your skill and time when Clyde's air conditioner is under the weather. Clyde gives his skill and time when your car is mobility challenged. When you pay for a service with work and time, you free up your money to be invested in your future. To find people to barter with, you do a very strange thing. You get out and walk around in your neighborhood and actually talk to people.

When you buy, negotiate for a better price. Never accept the first price on a big-ticket item. They will come down for you rather than lose the sale.

Apply weather-stripping, insulation, heat barrier, and/or attic ventilation fans as necessary to reduce energy costs.

Change your income tax withholding so that you get little or no refund. What? We let the government hold our money for a year with it earning no interest. Then we jump up and down for joy when we get our own money back! I would rather invest the refund in my life throughout the year. You will have more cash in hand through the year and this will help you build the emergency fund since you will not be relying on survival crutches anymore. If you do this, make certain that enough is still withheld to pay taxes.

Another withholding strategy is to go the other way and increase it so that your taxes are paid with 9 months of withholding through September. At the end of September, change the tax withholding again making it much lower than normal or even nothing so that you have more money in your paycheck to use for Christmas and thereby avoid credit.

Organize a "Blessing Day" that occurs one day every month at your church, temple, synagogue, or mosque. Those with skills, such as car repair, roof repair, air conditioning repair, plumbing, etc., bless those in the membership who are struggling such as single mothers, the terminally ill, and widows by doing repairs that these folks cannot afford. In Proverbs it says that when you give to the poor (those who are struggling), you are actually "lending" to the Lord. He will repay. If you bless these folks, your attempt to live a low-cost life and attack debt will in turn be blessed.

These are just suggestions. You can use or refuse any of these ideas. There are many other ways to save money that I am sure you can devise on your own. This is all just a matter of what you decide to do. For example, I used to do my own roof repair. There are complete instructions on the side of each bundle of shingles that tell you exactly how to put a roof on a house. I no longer get on roofs and I no longer do my own oil changes. I am old and fat and I am not going to get on a roof or under a car.

If you save just $50 a month by reducing living expenses and invest this tiny amount in an aggressive growth stock mutual fund from age 25 to age 70, it should grow to over $1,750,000 in your lifetime. It is possible to find much more than $50 a month in LEX Cash if you decide to really work at it.

Even in your everyday living expenses, your wealth is hidden in the fragments of your life.

http://LittleCashGiant.wordpress.com Wealth building wisdom for the "little guy", the "big guy" and the "inbetween guy".

Your Wealth is Hidden in the Fragments of your Life: Part 7

2008-08-15T13:53:00.000-07:00

This is the 7^th in a series of 10 “fragments” articles. Behold the fragments of wealth you can extract from your everyday life with the “Walk Up” strategy.

With a raise of 1%, you would increase money going into retirement accounts by 0%.

With a raise of 2%, you would increase money going into retirement accounts by 1%.

With a raise of 3%, you would increase money going into retirement accounts by 1%.

With a raise of 4%, you would increase money going into retirement accounts by 2%.

With a raise of 5%, you would increase money going into retirement accounts by 2%.

With a raise of 6%, you would increase money going into retirement accounts by 3%.

With a raise of 7%, you would increase money going into retirement accounts by 3%.

With a raise of 8%, you would increase money going into retirement accounts by 4%.

With a raise of 9%, you would increase money going into retirement accounts by 4%.

With a raise of 10%, you would increase money going into retirement accounts by 5%.

With a raise of 11%, you would increase money going into retirement accounts by 5%.

With a raise of 12%, you would increase money going into retirement accounts by 6%.

With a raise of 13%, you would increase money going into retirement accounts by 6%.

With a raise of 14%, you would increase money going into retirement accounts by 7%.

With a raise of 15%, you would increase money going into retirement accounts by 7%.

With a raise of 16%, you would increase money going into retirement accounts by 8%.

With raises over the next few years, Ella and her husband will "walk" the withholding amounts into the 401K's up to the maximums allowed. Then each of them will start an IRA at Edward Jones and use raises with the same schedule to "walk" the deposits up to the maximum allowed. As this money is automatically deposited into their 401K's and IRA's, it will never be in their hands and they will never have to exercise the will power required to refrain from spending it. They will still see more take home money in their paychecks after each raise.

Edward Jones will help them understand the difference between a traditional IRA and a Roth IRA, so they can decide which type of IRA to invest in. After they max out monthly deposits to the 401K's and the IRA's, they will check with Edward Jones again to set up automatic investing into another self-directed retirement account. The limits on this change over the years, but after maxing the contributions to the 401K and the IRA, you are allowed to put up to a certain amount into another self-directed retirement account. The money you deposit into this retirement account each year is not exempt from taxes in that particular year, but the growth of this account over the years is exempt from taxation. Ella and her husband will use the "Walk Up" strategy with every raise until they have maxed out all allowed contributions to their 401K's, IRA's, and the other self-directed retirement account.

The process of maxing out monthly retirement contributions to all 3 investment vehicles mentioned will take several years. After accomplishing this, Ella and her husband will use the same "Walk Up" strategy with every raise to increase contributions to the after-tax "buy and do" investments, primarily mutual funds, available through Edward Jones.

Please note that I am not recommending or promoting Edward Jones. When I first heard of Edward Jones, their required minimum balance to open an account was lower than the other firms that had asset management accounts. I also noticed that their offices were spread out all over town. I just got in the habit of mentioning Edward Jones when I give examples. There are several other fine brokerage/financial services operators that can help you now that you understand that your wealth is hidden in the fragments of your life.

http://www.ehow.com/members/littlecashgiant.html A how-to blog about family financial planning, building wealth, and destroying debt.

http://EzineArticles.com?expert=David_Unger

Your Wealth is Hidden in the Fragments of your Life: Part 6

2008-08-15T12:05:00.001-07:00

This is the 6^th in a series of 10 “fragments” article. Are you an unrealized millionaire?

The Survival Loop

Survivors---"Help" flows from Provider to Survivor, right to left----Providers

Survivors---Wealth flows from Survivor to Provider, left to right--Providers

We see here what goes on at the national level. “Help” flows from the Providers to the Survivors and billions of dollars of wealth is transferred over the decades from the Survivors to the Providers. Millions of "survivors" have not realized that they could become their own insurance company for the lower end of their loss. They could take actual coverage for the higher end of their loss, but cover the lower end themselves and save the difference.

The "loop" above is a survival loop for the survivor, but is a wealth induction loop for the provider. As it loops over the years and over the decades, wealth is transferred from the survivor to the provider. The loop induces wealth for the provider. The providers are insurance companies, finance companies, credit card banks, mortgage companies, and all the other wonderful institutions and individuals who "help" the survivor survive on his trip to nowhere.

And to think, we have not yet even looked at the impact of credit cards and other debt loads. If paying $34 a month for a lower deductible on car insurance causes a loss of over $1,250,000 over a lifetime, then paying $100 a month on credit card payments produces a loss of over $3,750,000 over a lifetime! Remember, to the one with the eagle perspective, the cost is not just $100 a month, but what that $100 a month would grow to if invested for 45 years from age 25 to age 70 in an aggressive manner.

IF YOU DO NOT BELIEVE THE IMPACT OF THE SURVIVAL CRUTCHES IS REALLY THIS GREAT, I INVITE YOU TO SIMPLY DRIVE NEAR OR THROUGH ANY MAJOR DOWNTOWN AREA IN NORTH AMERICA AND TURN YOUR HEAD TO LOOK AT THE BUILDINGS.

Most of the tallest, newest, and most impressive buildings you see are owned by the very "providers" who supply the survival crutches which you "rent." They do not call you during your supper to offer you a credit card or another of these survival crutches because they like you. They do it, as Machiavellian as this may sound, to transfer your wealth, whether bit by bit or boatload by boatload, from you to them.

If you are a typical American or a typical citizen of an industrialized nation with a vigorous western-style economy, your life right now is already a wealth induction loop. You either induce wealth for the "providers" or you induce wealth for you and your family. If you are just gliding along and running your life as a "survival loop," you are operating a wealth induction loop for the benefit of the "providers" to whom you are enslaved.

I estimate that the wealth transferred from a working class family is from $10 million to $20 million over a lifetime.

For a middle class family, I believe it is from $20 million to $30 million over a lifetime.

For an upper middle class family, I estimate that it ranges from $30 million to $40 million in a lifetime.

"Survivors" live their whole lives as unrealized millionaires because they do not realize that THEIR WEALTH IS HIDDEN IN THE FRAGMENTS OF THEIR LIVES.

http:///www.HushDoNotTell.com Request free copy of "Your Wealth is Hidden in the Fragments of your Life" or "The Debt Destruction Engine" or both.

Your Wealth is Hidden in the Fragments of your Life: Part 5

2008-08-15T11:35:00.000-07:00

This is the 5^th in a series of 10 “fragments” articles. Ella finds $450 per month hiding in the fragments of her everyday life. We are putting building blocks together piece by piece for an attack that will destroy our debt. Please stay with me just a little longer to get this.

Ella and her husband read "Your Wealth is Hidden in the Fragments of your Life" by David Unger and "The Wealthy Barber" by David Chilton. They identify the survival crutches in their financial life and cut out these inefficient survival aids. The total amount required to pay their monthly bills now drops $150 because they had been paying $150 extra every month to "rent" survival crutches. (The monthly cost of survival crutches would be less than this for some people and a lot more than this for many others.) They now arrange for this $150 to go automatically into a separate account at their bank every month. This will be their Emergency Fund.

Ella and her husband both read chapter 5 of "The Wealthy Barber" again and realize that it would be wise to have term life insurance rather than the whole life policies they both have now. They ask several knowledgeable people to advise them about this to make sure they understand what they are going to do. They obtain the term life insurance policies from a company with a solid financial rating in the appropriate amounts.

Only after having the documentation in hand that verifies that the new term life insurance policies are in force, do they cash in the whole life insurance policies and put the money they receive into the Emergency Fund. Taking whole life rather than term life insurance is a survival crutch they missed on their first pass when they looked at their financial life to identify the crutches. They pay less now for the premium on the two new term life insurance policies than they were paying for the two whole life policies, so their monthly bills drop another $50.

Next, they start thinking about the income tax refund they get every year that is usually a little over $2,400. They are usually in desperate trouble at refund time every year and have to use the refund to just barely bail themselves out. They decide to take the refund throughout the year by raising the number of withholding allowances. Their take home pay increases by $200 per month.

They carefully monitor their withholdings as they do this new thing to make sure that enough money is withheld so as to avoid penalties. Letting the government withhold too much money and hold it throughout the year can also be considered a survival crutch. They plan to add this $200 to the Emergency Fund every month. They hope to avoid the chronic cycle of financial trouble through regular deposits into the Emergency Fund throughout the year.

Next, they look at "LEX Cash" to find a little more money to add to the Emergency Fund. The LEX Cash concept is taught in a later "Fragments" article. It is finding "fragments" of cash by reducing living expenses with a few common sense strategies. Ella and her husband do not bear down too much in this area, but still manage to reduce living expenses by $50 per month. (For many, it is possible to reduce living expenses by much, much more that this amount.) Ella and her husband now have another $50 freed up which they plan to add every month to the Emergency Fund.

Cut out Survival Crutches $150 per month

Changed to Term Life Insurance $ 50 per month

Increased Withholding Allowances $200 per month

LEX Cash $ 50 per month

Monthly Deposit to Emergency Fund $450 per month

Ella and her husband had previously arranged for $150 to go into the new Emergency Fund every month. They now go back to their bank. Their paychecks are already set up for automatic deposit, but now they change the monthly deposit to the Emergency Fund from $150 per month to $450 per month. $450 goes automatically every month to the Emergency Fund and the remainder of their payroll checks go to the regular checking account.

When something goes wrong, the kind of thing previously covered by survival crutches, Ella transfers the exact amount needed from the Emergency Fund to the regular checking account. They do not keep a checkbook for the Emergency Fund so as to avoid the temptation to use it for impulse spending. Over the coming months and years, the Emergency Fund will grow and will tend to exceed the demands placed upon it.

After another 6 months, Ella and her husband go to Edward Jones to transfer their accounts from their bank. They did not have the required minimum balance to open Edward Jones accounts until now. They open 2 asset management accounts, one for the checking account and one for the Emergency Fund. They close out their accounts at the bank and transfer the funds into the new accounts at Edward Jones. (They are moving their accounts to Edward Jones because they are positioning themselves for a new life as habitual investors instead of habitual debtors.)

Asset management accounts are national checking accounts that pay better interest than you can get in a conventional bank checking account. They see that the Emergency Fund has grown, even with money being transferred out of it to pay for things that go wrong, so they can now put a part of the $450 in the Emergency Fund and the rest of it in investments.

Since they know they will be investors now, Ella and her husband read "24 Essential Lessons for Investment Success" by William J. O'Neil to figure out what to invest in. Through the rest of their lives, they will adjust the amount of money going into the Emergency Fund up and down many times due to the changing circumstances in their lives.

The transition may not be as idyllic as that portrayed here. In the first few months, the Emergency Fund might be overwhelmed because so many things could happen all at once that there is not enough money in the Emergency Fund to cover what goes wrong. You may have to go back into the prairie chicken world and use credit to resolve these problems. Even if the Emergency Fund is overwhelmed 2 or 3 times before you get this process working, it would still be well worth it to make this transition.

There may be 4 years or 5 years out of every 30 years when you would be better off to just "rent" the survival crutches. This is just my estimate based on my observation. However, there may be 25 years or 26 years out of every 30 years when you would be better off to cut out the survival crutches, put what you were paying for survival crutches into an Emergency Fund, pay for what goes wrong out of the Emergency Fund, and invest the difference. Over the long run, you will be far better off if you cut out the survival crutches, save the money you were using to "rent" crutches, pay for what goes wrong, and invest the difference.

http://www.HushDoNotTell.com Destroy all of your debt, including the mortgage, with the money you already make.

Your Wealth is Hidden in the Fragments of your Life: Part 4

2008-08-15T10:30:00.000-07:00

This is the 4^th in a series of 10 “fragments” articles.

To the prairie chicken man, the extra $34 per month for the lower deductible has a cost of $34, just that and nothing more. The prairie chicken man can only perceive the present moment or the present month.

To the eagle man, the extra $34 per month for the lower deductible has an actual cost of over $1,250,000. The eagle man perceives the cost of any regular payment as being the loss of the future wealth that would have accumulated if the payment had been fed into an investment stream throughout the entire working life.

To the prairie chicken man, the $39 a year for Discover Chargegard costs exactly that, just $39 a year.

To the eagle man, the cost of taking Discover Chargegard is over $100,000. This is the total amount lost because of not investing the piddling $39 a year in an aggressive manner throughout the eagle's entire working life.

Here we list several potential survival crutches. Each of these may or may not be a survival crutch with the circumstances that exist in your financial life. In "The Debt Destruction Engine," I discuss how to decide whether or not a suggested item really is an unnecessary survival crutch. I also recommend, no, I actually insist that you read chapter 5 of "The Wealthy Barber" by David Chilton before you make any changes to your life insurance coverage. Chilton explains how to decide what kind of coverage you need and how much coverage you need.

Here is the list of potential survival crutches:

Paying more money for a lower deductible on any insurance policy

Charge Guard Protection (You can cancel this coverage at any time.)

Credit Life Insurance (Pays off a loan in event of death, which is an eventuality more efficiently taken care of by term life insurance. You can cancel this coverage at any time during the term of the loan.)

Supplemental Accident Policies (Eventuality more efficiently covered by your regular term life policy.)

Full coverage on old vehicles with low book value (You can change coverage to liability only, when book value drops to a very low amount.)

Death, Dismemberment, Loss of Sight Coverage on Auto Insurance (You can call your agent and drop this inefficient add-on coverage.)

Medical Insurance on Auto Insurance (You can call your agent and drop this inefficient add-on coverage. Your regular medical policy covers you whether you are in a car or not.)

Insurance Policies on Children with High Death Benefits (It is wise, generally speaking, to carry no more than $20,000 on each child. You want to invest in the life of the child more than you want to guarantee that you will receive a large payment if the child does not survive.)

Taking Whole Life or Universal Life rather than Term Life Insurance

Cash per Day of Hospitalization Policies

AFLAC-type Coverages (Unless completely free through work)

School Accident Policies (Eventuality more efficiently covered by regular medical coverage.)

Towing Coverage on Auto Insurance (It is, generally speaking, more efficient, over the long run, to save the amount that this would add to the premium and pay for the towing yourself. As you get much older, this is less likely to be a true survival crutch.)

Car Phone/Audio Equipment Coverage on Auto Insurance

Monthly Premiums for Optometrist and Chiropractic Discount Plans

Mortgage Protection Insurance (It is, generally speaking, more efficient to pay off the mortgage with the death benefit of the term insurance policy. It is, generally, more efficient to increase term insurance coverage for this purpose, if necessary, rather than taking mortgage protection insurance.}

Credit Disability Insurance (Pays off a loan in event of disability. You can cancel this inefficient coverage at any time during the term of the loan.)

Cancer Policies

Extended Warranties (It is, generally, more efficient, in the long run, to save the money you would pay for this coverage and just pay for the covered repairs yourself. You can usually cancel this coverage at any time.)

Burial Policies (It is more efficient to take a term life insurance policy.)

Repair Contracts (It is, generally speaking, more efficient, in the long run, to save the money you would pay for this coverage and just pay for the repairs yourself.)

Dental Insurance (Assess this one carefully. For most people in most situations, this is a survival crutch. For some, it will not be an inefficient crutch. You have to size up your own situation.)

Prescription Card Programs

Rental Car Reimbursement Coverage on Auto Insurance (See "Wealth without Risk" by Givens.)

Allowing the government to "store" your money by intentionally having too much withheld for income tax

Any Policy that Covers Deductibles

Any Policy Where You Pay More in Premiums Than You Can Collect in Benefits

Using Credit When A Way Can Be Found To Use Cash

There is a book I would like to recommend that will help you understand the survival crutches, but I have to give a loud and stern warning to protect you and to protect me (from liability).

If you decide that you want to replace your whole life insurance or universal life insurance with a term life insurance policy:

(1) obtain the term life insurance policy

(2) from a company with a solid financial rating

(3) in the appropriate amount as explained in the "The Wealthy Barber"

(4) and have the documentation in hand that proves that the insurance on you is in force

Before

You cancel the old whole life policy or cancel the old universal life policy!!!!!!!!!!!

With this understanding, I can recommend "Wealth without Risk" by Charles S. Givens. You will understand the survival crutch concept much more clearly after looking through the strategies in Givens' book. I usually get this book for about $4.50 at Half Price Books to give it away to people to help them understand the idea of the survival crutch. Please bear in mind that "Wealth without Risk" was written in the 1980's and the information within it is not completely up to date today, but floodlights will turn on in your mind as you read it. Your wealth is, indeed, hidden in the fragments of your life.

http://www.HushDoNotTell.com Destroy all of your debt with the money you already make.

Your Wealth is Hidden in the Fragments of your Life: Part 3

2008-08-14T19:20:00.000-07:00

To tell the rest of the “fragments” saga, we need to pause here to look at 2 very dissimilar creatures. There are differences in behavior between a prairie chicken and an eagle that arise from their different perspectives. The prairie chicken bee bops around in the grass and never flies very high. He only sees and thinks about what is immediately around him.

The eagle soars to dizzying heights and sees many miles in all directions. She has a much more expansive view and attitude because of her perspective. She thinks about what is far off as well as what is close at hand.

There are differences in behavior between prairie chicken people and eagle people that arise from their different perspectives as well.

The prairie chicken man (or woman) bee bops around in his everyday life and never flies up high in his mind to think about the future and what might be possible in it. He does not think in terms of taking actions now to achieve a better destiny. He pursues pleasure and avoids pain. There is no noble purpose ordained for him, no mission he is called to. He only sees and thinks about what is immediately around him.

The eagle woman (or man) soars up high in her imagination and perceives what is going to happen in the future as the logical consequence of actions taken right now. She will, when necessary, embrace sacrifice and avoid pleasure in order to achieve the desired destiny. She thinks about what is far off in the future as well as what is close at hand. She will take actions now to create the future she desires. The eagle woman perceives that there is a calling on her life, a mission that God ordained before time began.

The Parable of the Adopted Eagle

There is a blizzard raging high in the mountains. An eagle’s nest, near the summit, is broken open on one side by a sudden blast of wind. A single eagle’s egg falls out and slides down the side of the mountain on the snow. Miraculously, it is not broken as it careens down rocky slopes all the way into the valley below. It comes to rest, unscathed, in the tall grass near a nest of prairie chicken eggs. The prairie chicken mother notices it lying there and, thinking it is one of her own that has fallen out, picks it up and puts it in her nest. This eagle is raised as a prairie chicken. He is never very happy. An eagle makes a crappy, lousy prairie chicken. The other prairie chickens think him funny looking, odd, and inferior.

One day when the little eagle and his prairie chicken siblings are out playing, chasing bugs in the grass, a huge shadow falls over the land. They all look up and see the majestic sight of an eagle soaring so high that you almost can not lean your head back far enough to see her. One of his “brothers” says, “I see that look in your eyes. You could never fly like that. The eagle is the greatest of all the birds. You are a prairie chicken.”

For a moment, the little eagle thinks he will bestir himself and bolt up out of the prairie chicken world and do great aerial exploits with the eagles. Then the thought passes. “You’re right,” he says. “I’m just a prairie chicken.” So he lives out the rest of his miserable life as a prairie chicken.

Do not let the prairie chickens tell you that you are not an eagle. Be an eagle. Bolt up out of the prairie chicken world and soar high!

http://LifeInBodunk.wordpress.com Humor blog on life in "flyover" America.

Your Wealth is Hidden in the Fragments of your Life: Part 2

2008-08-13T13:45:00.000-07:00

This next example of a survival crutch, Chargeguard Protection, is interesting because such a tiny amount of money is paid to "rent" this crutch that it is hard to imagine how it could make a significant difference. Chargeguard protection means that you will not have to pay if an unauthorized person gets your credit card or debit card and uses it to withdraw cash or make purchases.

The last time I checked out the Discover Chargegard (spelled without a "u"), it cost just $39 a year to subscribe to this protection. When I looked at the 12 aggressive growth stock mutual funds that I mention in a previous article, the $39 a year invested for 45 years from age 25 to age 70 would, hypothetically, accumulate over $100,000 for the lowest producing fund and over $500,000 for the highest producing fund.

If you read the small print that appears on the backside of the form you sign for chargeguard protection, you will find that you are only liable for $50 when your card is stolen.

This is true by virtue of law without subscribing to any kind of chargeguard protection.

If you take Discover Chargegard Protection throughout your entire working life (age 25 to age 70), you are forfeiting from $100,000 to over $500,000 of future wealth to protect yourself from a $50 hit. $39 a year is definitely a "fragment." Your wealth is hidden in the fragments of your life.

Please note that the 12 aggressive growth stock mutual funds used in these examples were chosen at random in the file room of the financial planning/investment management firm where I worked. These were simply the first 12 funds that I came to that had at least a 15-year history. There may well be other aggressive growth stock mutual funds that performed more poorly than the lowest producing fund in the group of 12 funds that I looked at. It is also true that the growth over the 45 years would not necessarily be the same as it was during the track record of these funds.

Even allowing for that, imagine that the actual accumulated amount for the 45 years would only be ¹/₅ of the total in the example of the lowest producing fund. In this case, you would not forfeit over $100,000 of future wealth by taking Discover Chargegard Protection throughout your entire working life.

You would forfeit "only" $20,000 or more of future wealth to protect yourself from a $50 hit.

In the previous example of paying $34 a month extra for a lower deductible, you would not forfeit over $1,250,000 of future wealth.

You would forfeit "only" $250,000 or more of future wealth throughout your entire working life to make sure you had $250 when you needed it.

Even if your investments perform much more poorly than the examples given, it is still true that your wealth is hidden in the fragments of your life.

http://www.HushDoNotTell.com Destroy all of your debt including the mortgage with the money you already make.

Your Wealth is Hidden in the Fragments of your Life: Part 1

2008-08-12T23:44:00.000-07:00

For an extra amount of $34 added to your monthly premium, the deductible will be lowered from $500 to $250. If you do not pay this extra $34 per month, you will have to come up with $500 when you file a claim. If you do pay this extra $34 per month, you will have to come up with only $250 when you file a claim. You are, then, paying an extra $34 per month for $250 of potential value ($500 -$250 = $250 of potential value).

12 monthly payments X $34 per month = $408 per year. You are paying over $400 a year for $250 of potential value. In 5 years, you are paying $2,000 (5 years X $400 per year) for $250 of potential value. At this point, someone will usually argue that the example is not valid because you could have more than one claim during those 5 years. Divide the $2,000 you pay in 5 years by the $250 of potential value and you get 8. You would have to file 8 claims during the 5 years to just break even on this deal. Long before you reached the 8^th claim, your insurance would be cancelled and you would be paying a very high premium for insurance from a high-risk pool.

Then consider what would happen if that $34 per month were invested by deduction or automatic deposit into a pre-tax account (401K or IRA) from age 25 to age 70. I looked at 12 aggressive growth stock mutual funds that had a track record of 15 years of more. By age 70, the lowest producing fund in this group would accumulate, hypothetically, over $1,250,000. The highest producing fund would grow (again, hypothetically, with no guarantee that this would happen) to over $6,000,000. This is assuming that the long-range growth would be roughly the same as it had been throughout the life of each fund. There is no way of knowing for sure that the pattern of growth would be the same, but this serves to give you an idea of what is possible by cutting out the survival crutches such as this measly $34 a month and investing it in your future.

A survival crutch is a means of survival that we "rent" that actually transfers our wealth to those institutions such as insurance companies, credit card banks, finance companies, and mortgage companies who "help" us survive on our wonderful trip to nowhere. There are 28 of these that commonly occur in our monthly bills that I will tell you about in later articles. Survival is, of course, necessary, but there are more efficient ways to survive than by renting these crutches and giving our futures away.

To review then, paying $34 extra every month for a lower deductible on car insurance is a survival crutch. Throughout her life, the typical American, then, forfeits over $1,250,000 of wealth to make sure she has $250 when she needs it. $34 a month is a fragment by anyone's definition. Your wealth is hidden in the fragments of your life.

http://www.HushDoNotTell.com The impossible made possible.