Why You Don't Want A Tax Return

So, now that January's over you have a W-2 and you're busy trying to figure out the best way to get that money away from the government and into your own hands.

You start hearing things like, "Oh, my sister's brother-in-law has an uncle who's going to do it for me," or "My daughter's friend is studying to be a CPA, so I think I'll ask her."

I'm sure everybody who majored in anything close to math dreads this time of year, because they get W-2's shoved at them from every angle from people with puppy-dog eyes and pleas like, "I really need to get $2,000, so I can use it as a down payment on a car."

You want to get money back from the government every year, right? As big a check as you can, right?

Sorry, friends, but no you don't.

You really don't.

You don't want Uncle Sam to give you back one thin dime.

Shift your mental gears for a moment. Imagine a friend of yours comes up to you and hands you two thousand dollars, cash. "Here you go," he or she says. "Take it with my blessing."

"Wow," you say, because although your friend can be helpful, you didn't think they had this kind of money. In fact, they're usually broke, so them having extra to give you makes no sense. You say the only thing you can think of: "Thank you!"

"Don't mention it," they say. "It's actually your money. I've just been taking it here and there where I could, and I thought you could use it back, now."

Would you be grateful to that friend any more? Would the two thousand dollars seem like a very generous gift?

Or would you want to blurt out something like, "You idiot! I could have been using that money all this time to pay down this high interest debt that I have! How long have you had this?"

"Oh, about a year."

"A year? I have debt that costs me 25% interest! You taking this two thousand dollars cost me five hundred bucks!"

Or, if you don't have debt, "I could have put this in my mutual fund and earned two hundred and sixty bucks!"

Or, if you think saving and paying off debt are a waste of time, "I could have blown this on DVDs and pizza!"

The point is, someone else using your money for a year isn't a great proposition. Yet we keep doing it, year after year, when we have too much withheld from our taxes.

Why do we do this? I think there are a few reasons.

1. We actually think we're saving money.

If we're putting money somewhere that we can't get to it for a while, that's a form of saving, right? So if I have extra taxes withheld, I'm giving money to the Government I won't get back until the end of the year. It's like a forced savings plan, isn't it?

No. To borrow an analogy from Robert Allen, a dollar is like a seed. If you plant it in the right place, it will grow. Saving and investing consist of putting the dollars in one of those places. If you want to save your money for a year, your banker will be more than happy to take it away from you for any period of time you would like--they call it a Certificate of Deposit, or "CD" for short. Unlike Uncle Sam, they'll give you some interest on your money.

2. We don't want to run the risk of having to pay.

I'm one of these. While I don't love the prospect of letting Uncle Sam have an interest free loan for a year, it does sound more appealing than having to pay him when the year is up. I have enough debt already. Do I really want to add the Federal Government to the list?

Really, paying back money to Washington isn't as bad as you think. It's almost like the above scenario, turned upside down. You get to be the friend who comes back at the end of the year and says, "Oops. I think this is yours." You get to be the friend who gets the free loan.

In fact, why not use that paranoia you have that the Men In Black will come and haul you away as a motivation to start really saving something? If you think your deductions came down by too much, take that amount and put it in a savings account every month, or a money market account, or somewhere that it will earn you something. Every time you're tempted to grab it, just picture Tommy Lee Jones getting out of a black Mercury in front of your house with a ray gun.

At the end of the year, if the government does want money, you're covered and you still have the interest to play with. And if they don't want it, you're golden--that money is yours now, free and clear.

I'm not suggesting you increase your withholdings above what really belongs to the government. The ideal scenario is that you pay them a couple of hundred dollars, or you pay them a couple of hundred dollars. But if you're getting back checks with four or five digits to the left of the decimal point, and you're excited about it--

Well, I've got a deal for you. Why don't you just sign that check over to me? I promise to give you back the same amount in a year, and you can get just as excited about it all over again.

Or doesn't that sound like a good deal to you, when you really think about it?

31 days down, 334 to go -- One Month

Well, I'm 1/12th of the way through this thing. I'm more than on track to lose all my weight, and way behind on my efforts to get out of debt. Not that I expected to be any farther on the debt by now, but it hasn't come down by 1/12th, so I'm technically behind. Although the good news is my tax return should even things up.

It is going to be enough to nearly pay off this fine laptop I'm computing on. Since that's the highest interest debt I have, that will be a very good thing.

Something like 30 bucks of the 40 bucks a month minimum payment was going to interest--meaning the "loan" was only going down by 10 bucks a month, despite the fact that the machine itself probably depreciated 1,000 the second it left the factory and came to me.

I read this week that more and more businesses are starting to operate this way. Sears credit is the highest money-making part of the Sears company. No longer does Sears sell tools, now they finance "stuff." Ford's the same way--they keep on making cars so their finance department will have something to finance.

They're all getting rich off the fact that you and I are willing to pay many, many times more for an item than the tag says, as long as they stretch those payments out to make it as painless as possible.

Once that's paid off, I will never finance a household product again.

Unexpected Expenses

Well, 1/3 of the $300 is now officially spoken for.

I walked out to my car yesterday morning to find my car window had been smashed in.

Again.

This time it was the driver's side. "Daddy's window," as my girls call it. It was still near enough to last time that I hadn't gotten out of the habit of emptying the car when I got out, so they got nothing.

Okay, maybe they got something--I didn't actually count the hot sauce packets in the glove box--but they didn't get anything of note.

A year ago, I don't know what I would have done in this scenario. With rent taking nearly every dollar of tommorrow's paycheck, I'd probably have tacked another chunk of change on one of the credit cards, which I may have just paid down to under the limit. Once the interest hit, I'd have been over my limit, and they'd have hit me with over limit fees. Then I'd pay it down in February until that monthly expense came up.

As it is, I'm glad I had the money there.

But I'll tell you--this is going to be a long year if every time I get a little ahead somebody breaks something.

Sunday Book Review: Rich Dad, Poor Dad

There are two ways to build wealth. The way I've been talking about, the Dave Ramsey way, the Millionaire Next Door way, is to get rich on equity. In other words, with money you actually have.

The other way is to use leverage. In other words, become wealthy by going into debt. I'm sure that doesn't make sense to anybody--when's the last time you knew somebody who had made tons of money off Visa?

The trick is learning the difference between good debt and bad debt. Leverage is, in theory, "good debt." The best way to define good debt is "debt that pays for itself."

In this book, Kiyosaki does a good job of changing the way we define the terms "asset" and "liability." Traditionally, an accountant would say an "asset" was something you owned that had value. A "liability" was something to which we owed money.

Kiyosaki's very valid argument is that, by this definition, we categorize a lot of things as "assets" that don't help us financially. Is that boat in the driveway really an asset? Or is it costing you loan payments, gas, and repairs?

This book calls for a new definition of these terms. An asset is something that puts money in your pocket. A liability is something that takes money away from you. If you were to lose your job today, would this item bring you money, or drain money? That's how to tell if it's an asset or liability.

Instead of "Net Worth," Kiyosaki talks about "Cash Flow." His definition of wealth is whether you have enough money flowing in each month from assets to pay all your expenses, even if you quit working today. If you do, you're wealthy. Regardless of whether that's $1,000 a month or $100,000 a month, if it covers your expenses you're wealthy and free to do whatever you want--work or otherwise.

So good debt would be invested in an asset that pays for itself and puts money in your pocket. If you buy a coin-op car wash and the payments on the loan are $1,200 a month but the car wash makes you $1,500, you now have $300 in positive "cash flow." You've harnessed the power of that much-mentioned "OPM"--Other People's Money.

Can this work? You bet. There are dozens of people who can prove it. A lot of your "flashy" millionaires are this way. Trump's leveraged up to his hairpiece. I'm sure that's why he files bankruptcy week after week after week.

And while we all sit back, feeling smug to watch him making and losing fortunes over and over, you notice he still gets to have the big house, the big plane, and the fancy weddings no matter how many times he does it. There are advantages to leveraging.

But books like this always contain caveats. "Don't buy the first house you find!" "You'll have to put a lot of effort into finding the deals." "I shop for deals on homes the way your Mom used to shop for deals on groceries."

In other words, they have to put as much time, effort, and energy into this as you're already putting into your full-time job.

Operating leveraged isn't easy. It's very, very risky. If you find yourself in a money-losing investment, you're going to have to come up with that difference yourself, and even if you manage to bail out on it, it will often be at a loss since it proved to be worth less than you thought.

And there are plenty of not-so-flashy equity millionaires. Bill Gates is an equity billionaire. Microsoft, for all the problems people have with them, runs debt free.

I absolutely believe in the "Cash Flow" principles taught in this book. We need to learn to buy things that make us money instead of buying things that cost us more money. Your money can undoubtedly work harder than you can.

However, I still maintain the risk involved in leveraging is only worthwhile when you can afford to take it.

Speak Your Mind

As an experiment, I've gone ahead and enabled the comments on this site, at a couple of people's request.

Time will tell whether this proves to be a good thing, or one of those experiments that goes horribly wrong and wipes out half of humanity.

Fame!

Thanks to reneegetsfit.com for the link. Keep it up, Renee!

And thanks for the info on peaches. I never knew you could get 10% of your daily calcium from a peach.

Discipline--It Ain't Easy

Alright, so I just got a mileage check in the mail, for over $300. I had to do a lot of driving in December, and now the company's paying me back for it.

So now we've got $300 burning a hole in our pockets. Part of what got us here was the overwhelming desire to spend every penny we got, and some we didn't. So now, we're locked into a tight budget, where every penny we've got (and some we don't) are all spoken for, and it's like somebody who just got tied up discovering he has some wiggle room.

Your brain focuses with laser-like intensity, on that one spot you can move.

So now we've got $300. We know there's a bunch of things we could use. My wife needs a new sewing machine. The refrigerator's about ready to go. The rice cooker went out, the crock pot's cracked, etc, etc, etc.

We also know the car needs some work done on it. We did a quick fix job on it (I cleaned the spark plugs) but didn't really address the real problem (something is leaking that needed to be cleaned off the spark plugs). Technically, the money is meant to fuel and maintain that car.

Actually, to be even more technical, the best thing you could do with a mileage check is save it to pay cash for your next car. Helping pay this car off would be the next best thing to that.

Of course, I could also put it away, and use it as an emergency fund for whichever of these becomes a crisis first.

In other words, there's a whole bunch of logical, sensible stuff this could go to, that would either curtail a future problem, or shore me up for when it happens.

So why is it my first reaction is still, "Hey, I got some money. Let's order some pizza!"?

Insulin

Some of the hard-core Atkins folks out there are saying, "What about the insulin response?"

See, when you OD on carbs, your body produces Insulin, a fat-storage trigger. This is because the carbs get converted into sugar which goes into your bloodstream, and your body wants to get your blood sugar down. Hence the insulin tells it to cart off some of that sugar and store it, to get it out of the way.

Atkins says that by avoiding carbs, you're avoiding the insulin response. No insulin = no fat storage, right?

Sort of. What Atkins doesn't tell you is two fold.

1. You need carbs. You just do. You need them for energy, you need them to feel good, your brain needs them to think. So the logic of this is like the logic of telling someone that since that crud in their car engine that's slowing down performance is oil buildup, they shouldn't put oil in their car.

2. There are other ways to limit the insulin response. If you mix the carbs, either with fiber or with protein or with both (as is preferable) you reduce the insulin response without eliminating the carbs altogether. Since the rate at which the carbs get absorbed is slowed down, your blood sugar doesn't spike as much, and you're okay.

Bad Coupons

Of course, right now is a bad time for coupon clippers who are trying to cut down the whole grocery bill.

Unless you want to live on a diet of Nacho Cheese, onion dip and party favors.

Coupons

My wife is strutting around, quite proud of herself, with good reason. Since my entire family is in town for a bit, and won't all be together again for at least two years, my folks want to take pictures tomorrow night.

Of course, for my wife, pictures mean make-up, and make-up is something that we don't usually have in the house, because whenever my wife purchases any, it usually ends up contributing to frescos my two little da Vincis do on the walls.

She approached me about it timidily, knowing that we'd already spent our grocery budget, and that really all we had left was my gas money. Would we have enough to get some make-up?

I asked how much it would be. Twenty dollars? Forty? I might know math, but I don't know make-up.

She said she had some coupons, and that Rite Aid was having a sale, and she could probably get by for $20.

Well, not only did she have coupons, but she found "on product" coupons, too. There was a "Buy a makeup thing, get an eye makeup thing free" coupon, and a "Buy an eye makeup thing, get a different eye makeup thing free" coupon. By combining these, she got the makeup thing, the eye make-up thing, and the other eye make-up thing, all for less than the price of the make-up thing, since she had a coupon for that to begin with.

Plus, the coupons were for higher quality stuff than she usually pays for.

All told, she ended up with over $35 in name brand make-up for less than $13.

Coupon clipping works.

Why low-Cal is smarter than low Carb

(I previously posted this in the Good Eats Yahoo! Group, so if you've seen it before, that's where.)

Everything you eat is made up of five things. Proteins, carbs, fat, fiber, and water.

Every gram of protein you eat contains 4 calories.

Every gram of carbohydrates you eat contains 4 calories.

Every gram of fat you eat contains 9 calories.

Fiber and water contain no calories.

If you eat more calories than you burn, you're going to gain weight. If you eat fewer calories than you burn you're going to lose weight. Despite all the different kinds of "trick" diets, "special" diets, whatever, this is the basic formula for weight loss.

That's it. More = store, less = lose. It's that simple. It's science.

Okay, so if that's the case, you're left with two requirements if you want to lose weight: You need to burn more calories, and consume less calories.

Naturally, the best way to burn more calories is by exercising. Not only do you burn the calories you expend while you exercise, but if you get your heart rate up to aerobic levels for twenty minutes a day, you can increase your body's base metabolic rate for hours afterwards. So you'll burn a ton of calories.

Weight training is also good. Not only is it good exercise, but if your body has more muscle, you will burn more calories every day just by having it. Muscle is high-maintenance tissue, and calories have to be burned just to keep it going. Fat just sits there, requiring no maintenance at all.

You can also burn more calories based on what you eat. For example, if you drink eight glasses of ice-cold water a day, your body will have to burn calories to warm that water up to 98.6 degrees. You burn enough calories to lose a pound of fat in two weeks that way.

Also, eating fiber can increase your metabolism. Fiber contains no calories, yet requires energy to process. Hence some foods have "negative calories," like celery and other greens.

Or, eating multiple times throughout the day can keep your body in a constant state of digestion. This digestion burns calories. But if you're not eating a lot, it won't "weigh you down."

Some diets take this to an extreme, though, trying to regulate the entire metabolic system entirely through food, without requiring exercise.

The Atkins plan is based on the idea that by eliminating carbs, your body has to expend more energy in order to convert protein and fat into a "carb-like" state, so it can use them for energy.

Does this work?

Well, if you eat one gram of carbs, there are only four calories. A gram of fat has nine calories. So it will be harder to eat "less" calories of something that contains nearly double the calories per gram. In other words, five grams of fat would have more calories than ten grams of carbs.

Dr. Atkins will point out, though, that part of those extra fat calories will be burned up just to get that fat you ate into a useful state.

This is true. However, it's only true if the fat calories get burned the minute you eat them. If they don't, and the fat gets stored, all nine calories get planted directly on your waist. It takes no energy to store fat as fat.

On the other hand, while the carb calories do not require calories to be made useful for energy, it does require calories to convert the carbs into fat. So if you've had a little too much, not all four grams of carbs will see their way to your waist.

Anyways, here's the big caveat--not all weight loss is good. Just because pounds went away, doesn't mean you lost fat. You can lose water weight, you can lose muscle, and you can lose fat. Really, the only one you're worried about is fat. If the weight you're losing is muscle, that's actually bad.

And there lies the problem--fat is actually the hardest one to get your body to burn. Right now, today, if you started starving yourself, your body is not going to start using fat for nourishment. It's not.

If your body thinks you're starving, it's going to hold on to your fat like mad, because it doesn't know how long this "famine" is going to last.

When your metabolism goes into Emergency Mode, it does everything it can to avoid burning your fat. It generally plunders your muscles and the sugars stored in your muscles first. So while the pounds DO come off, you're losing muscle, not fat. And since pounds of muscle take up considerably less space than pounds of fat, you're not going to get any smaller around the middle.

This "Emergency Mode Metabolism" is called Ketosis, and it's the direct result of not having enough carbohydrates. For years, athletes used the same "Ketostix" that Atkins dieters now use, but for the reverse purpose--in order to AVOID Ketosis, because they knew it for what it was--not the time when your body becomes a "fat burning furnace" but the time when your body most stubbornly starts holding on to fat, and cannibalizing muscle.

Now, if you persist in a state of ketosis long enough (and you'll know when you're in it, because, among other things, your breath will be unbearable) your body WILL be forced to start burning the fat. And the inches will start to come off behind the pounds. You'll think things are great.

But the problem is, your body is coming at your fat cells with a starvation mentality. It doesn't know when it will see carbs again, and so it is still yielding up the fat reluctantly. It's slowing down your metabolism, so that you burn fewer calories a day, so it can tenaciously cling to as much of that fat as it can.

But the worst comes when you end the diet. Because as far as your body is concerned, you have just come away from a period of famine. And as far as your body is concerned, another famine may strike again at any moment.

Consequently, it will vigorously begin to store as much food as it possibly can as fat, saving up for the winter, so to speak. And you will actually gain more weight than before the diet, because now your metabolism is running slower, as I mentioned, and your body has less muscle on it, which means it burns fewer calories to maintain the muscle.

The sad truth is that your body just doesn't want to give up fat easily. The most fat you can hope to lose is 1-3 pounds a week. If you're losing more weight than that, you're not losing fat. You're losing water and muscle.

A good, healthy diet should look something like this:

Exercise every day. Weight train a few times a week.

Eat small portions throughout the day. Either eat six small meals, or three reasonable meals and have three small healthy snacks.

Eat unprocessed foods. In other words, foods that are as close to their natural state as possible (A twinky, for example, is not found in nature).

Have some of each of the five things at each meal. (Protein, Carbs, Fat, Fiber, Water.) Despite the Atkins people, your body really does need more Carbs than protein.

What will happen? At first, you won't lose as much weight. But you will lose
inches. Your clothes will fit better. This is because you'll be gaining muscle as you lose fat. The muscle is denser, so you have the same number of pounds in less space.

(Notice that this is the opposite of the Ketosis plan, where the pounds come off before the inches. This time, the right weight is being lost.)

Then, pounds will follow. As you have a greater amount of muscle, your base metabolic rate will increase, and you'll be burning more calories just standing around.

Because you're constantly providing nutrients to your body, it won't feel as obligated to store the fat as tenaciously. And since you're constantly digesting, even that will burn more calories.

And then your body really will be a metabolic furnance. You really will be burning more calories. At a relaxed, safe, calm pace. The same gradual process that you took when you put the weight on.

If pounds are coming off but inches aren't, you're losing muscle, not fat, and you need to up your carb intake.

The good news is that the reverse is true as well--if the inches are coming off, but the pounds aren't, relax. Your weightlifting is paying off. You're gaining muscle at about the same rate you're losing fat. Your weight may be the same, but your state of health definitely isn't.

Answering Riddles: Compound Interest

So, did you do the math? What did you find out?

If you missed it, go back and have a look at Saturday's riddle.

Okay, let's add it up for you:

Day - Plan A - Plan B
1) $100.00 $0.01
2) $100.00 $0.02
3) $100.00 $0.04
4) $100.00 $0.08 (Plan B people aren't even making a dime. This riddle doesn't even seem fair.)
5) $100.00 $0.16
6) $100.00 $0.32
7) $100.00 $0.64 (It's been a week, and the Plan B people haven't even made a dollar a day yet! What were those Plan B people thinking?)
8) $100.00 $1.28
9) $100.00 $2.56
10) $100.00 $5.12
11) $100.00 $10.24
12) $100.00 $20.48
13) $100.00 $40.96
14) $100.00 $81.92 (Two weeks down, and the plan B people still aren't making as much as the Plan A people! Halfway over, and the plan A folks are clear winners. Anybody want to switch sides?)
15) $100.00 $163.84
16) $100.00 $327.68
17) $100.00 $655.36
18) $100.00 $1,310.72 (Hey, wait! These plan B numbers are getting big!)
19) $100.00 $2,621.44 (Wait! The plan B people just got more in one day than the plan A people have made total, so far!)
20) $100.00 $5,242.88
21) $100.00 $10,485.76 (Three weeks down, and the plan B people are now making 100 times what the plan A people are getting! Things weren't like this a week ago.)
22) $100.00 $20,971.52
23) $100.00 $41,943.04
24) $100.00 $83,886.08
25) $100.00 $167,772.16
26) $100.00 $335,544.32 (That's over a third of a million dollars in one day!)
27) $100.00 $671,088.64
28) $100.00 $1,342,177.28 (Over a million dollars? Are you serious?)
29) $100.00 $2,684,354.56
30) $100.00 $5,368,709.12 (Five million dollars? What's happening here?)

The total payout? Under plan A, you'd get exactly $3,000. Under plan B, you'd end up with $10,737,418.23. It would take more than 3,000 months of making $3,000 a month to get that much!

So what happened here? How did we get from a penny to five million dollars?

The answer is a little principal called "Compound Interest." Albert Einstein is reported to have said, "Compounding interest is the greatest mathematical discovery of all time." I don't know if he said it or not, but as you can see in the above example, it's power can't be understated.

What compound interest means is this: If you have some money, and you put it in a place that earns interest, not only will your money earn interest, but the interest you earned will also earn interest. Before too long, you get to see interest earning interest on interest earning interest. This "stacking" of interest in on interest is called "compounding."

The money you make makes you more and more money the longer you let the interest "compound."

This is what it means if you hear that money is "compounded annually" or "compounded monthly." It describes how often they add the interest on top of the interest. If it's compounded annually, the interest only stacks up once a year. If it's compounded monthly, the interest stacks up every month. And if it compounds daily, then every single day, you're earning interest on the interest from the day before.

As you can see in the above example, the main thing you need in order to harness the power of this principle is time. The more time you have, the greater the principal can work for you. After one or two weeks, it didn't seem like we were doing that well. But the longer the time went on, the more dramatic the results became. If you extended this out further, you can imagine how quickly it would build.

The other important element is the interest rate. What percent interest you're making on your money can greatly accelerate the growth of your money. My example was extreme--we doubled our money every day. But you can double your money at any interest rate. To figure out how quickly, we use the Rule of 72.

To use the rule of 72, just divide the annual interest rate you're getting into 72. That's how many years it would take to double your money. At 10% interest, your money will double in 7.2 years. At 12% interest, your money would double in 6 years. On average, Coca Cola stock has returned 16% interest. At that rate, your money would double in less than 5 years.

How quickly does that add up? Well, let's say a teenager puts $2,000 away on his 16th and 17th birthdays. If he got 12% interest on that, he'd retire at 65 with $1,094,079.72, even if he never contributed another dime towards retirement.

On the other hand, if I, the guy turning 30 this year, put $2,000 a year in the same fund from now until I retire--that's $72,000, total--I'd still end up almost $10,000 shy of matching him. I'd still end up a millionaire, but with a $68,000 higher pricetag.

But even then, it still cost me less than $75,000 to become a millionaire. Those are still great numbers.

So now that you know how interest works, think about how your credit card companies are working with you. If they're getting 20% interest on their money, what's 72/20? Like, three and a half? By giving money to you at that interest rate, they can collect double their money from you in just three and a half years. You think you're paying it down, but you're really not.

If you only pay the minimum, the average credit card bill takes 48 years to pay off. The credit card company wants you to keep their money. They're more interested in letting that money compound, and letting you pay that.

Remember the other famous saying about compound interest: "Thems that understand it, earns it, thems that don't, pays it."

Sunday Book Review: The Business Plan For The Body

In a time when most diet and fitness books seek to provide you with some "trick" to losing weight, some special way that you can eat all that you want, as long as you avoid the special food type or special secret that "unlocks your weight loss power," The Business Plan for the Body by Jim Karas stands out as a no-nonsense, realistic approach to weight loss.

If you have no problem with your finances, but struggle with weight issues, this may be the book for you. His approach is simple--if you treat your body the same way you would the financials of a business, you can control your success.

While the Karas can be blunt, and at times comes across as a wee bit vain (I don't think I'd want to hang out with this guy in real life) the facts are straightforward and accurate. No over-the-top false promises here. Just an absolutely clean, no-hype look at the cold, hard facts for weight loss and fitness.

Halfway through my last weight loss success, I shifted from Body for Life over to this book. While Body For Life was great to get me started, I felt like this book helped me step it up. Worth a read.

A Riddle

Okay, here's a riddle we used to ask when we were kids. I'll give you the answer on Monday, but in the meantime, think about it. Do the math if you want. Here goes.

Which choice would you rather take:

A. A hundred dollars a day for thirty days.
B. A penny today, two cents tomorrow, four cents the day after that, doubling every day for thirty days?

Tune in Monday for the exciting conclusion!

My Lot In Life

Back when I first started this blog, I wrote a post about my past history. At the time, I felt it was a little to long to put up, and I really didn't know if anyone would care, so I saved it and set it aside.

I've decided to go back and add it here. If you're curious, you can go have a look. If not, that's cool, too. I'm sure I'll post something less personal and more helpfull soon.

In the meantime, I want those who read it to know that I'm not posting this so that anybody will feel sorry for me, or to try and evoke pity. In fact, I'm willing to bet that you've probably got a story in your own life that's even tougher (In fact, I probably still know a quarter of the people who read this blog, and in a lot of your cases, I know you've had it tougher).

I'm only posting it so everybody's clear on the fact that you and I are in the same boat. The circumstance we're in now is a mix of bad luck and bad decisions, mixed with a sprinkling of good luck and good decisions.

So now that I'm trying to open up the door for a little more of the latter couple, and push those first couple aside, I thought you'd be interested in what got me here.

Stupid Things I'm Doing

Since I spend so much time trying to sound smart, I thought you might be interested in knowing some of the stupid things I'm doing this year to try to help me, financially.

I am trying these stupid things so I will be able to say, for sure, whether they help me or not.

I am trying to win contests. I am not paying for any contests--I do not have the money for that. However, I am entering lots of free contests. I am entering contests on radio station websites. I am entering contests on cable network websites. I am finding out about obscure contests on sites like about.com.

I am using iwon.com daily for all my search needs. I also enter their daily "Pick 7" and "Instant Win" contests.

Today, I entered a contest at Boboli.com for appliances, one at food.com for a trip to New York and a cooking set, one at Kodak.com to win an Easyshare camera to replace the one I lost that belonged to my company.

At the end of the year, I will tabulate how much I profited off of contests compared with how much I profited off of doing actual work, and share my uncensored results with you, that you may know which endeavors are more profitable for yourself.

How do I expect the results to come out? Well, let's just say that in five years of offering the prize, it looks like iwon.com has only had to pay out "Pick 7" winners twice.

So I will be keeping my day job.

The Multiplier -- More on Cardio

Cardio gives you one other advantage besides the calories you burn while you're exercising and the good you're doing your heart. It's a little something fitness trainers refer to as "The Multiplier."

Based on how much activity you do, your body burns more or less calories throughout the entire rest of the day. Literally, the fit get fitter and the slow get slower. I know, it's not fair. It sounds like a way to make sure the rich get richer, the beautiful stay beautiful, and the powerful stay in power.

Well, like most rules of life, it seems unfair until you start making it work for you instead of against you.

How many more calories can you burn?

If you were to stay in bed all day long, your body would still have to do a certain amount of work to keep your blood flowing and keep you breathing and fire off a brain synapse of thought once in a while. This minimum number of calories your body burns in a day is called you "Basal Metabolic Rate," or BMR.

Based on how much activity you participate in, this number only goes up. How much?

It's 20% more even if you live in a cubicle all day and don't exercise.

If you get some exercise in a couple of times a week, or have a job that keeps you moving around a little, it's 37.5% more.

If you have a pretty strenuous job, or are doing some tougher exercise 3-5 times a week, it's 55% more.

If you're exercising hard six or seven days a week for a couple of hours, of have a job that can make you sweat every day, you can improve on your BMR by as much as 72.5%.

And if exercise is your life--you tote barges and lift bales all day, or maybe are a pro wrestler--you could burn 80-90% more than you would staying home.

All of this adds up to a couple of options, both of which are terrific. First, you could keep eating what you're eating, and increase your activity level, and that alone would be enough to slow down, stop, or reverse any weight gain you're experiencing. And, exercising combined with a more sensible diet can speed your growth phenomenally.

For example, let's say you're eating 2,500 calories a day and gaining a pound a week. If you cut back to 2,000 calories a day, the weight gain should stop (It takes 3,500 calories to make a pound of fat. 500 calories X 7 days = 3,500 calories). However, if you increased your amount of exercise from minimal to 3-5 times a week, you would actually burn an extra 583 calories a day, which means you'd also start to lose a pound week.

So tell Jack he doesn't have to worry so much about what that little counter on the gym treadmill says. First off, it's wrong, and second off, it's not so much about how many calories you burn at the gym as it is about the multiplier.

But if he wants to put out more sandwiches that are under 300 calories, that's not a problem.

Interesting Links

Motley Fool's Guide to How To Get Out Of Debt
Excerpts from Rich Dad's new comic book
BankRate.com's Debt Paydown Application
The Virtual Stock Exchange
Fitday.com free diet and fitness Tracker
Dave Ramsey's Free Quickie Budget planning form

Getting Somewhere -- The Tale Of The Tape

That's more like it.

My Heart Will Go On - Cardio

When most people fear exercise, it's cardio they're afraid of. They imagine running in the cold of morning or prancing around to Richard Simmons and they wince and reach for the Cheetos.

But no matter what amount of weight you can lift or how many sit-ups you can do, if you want to bring those ripped muscles and washboard abs out from under that insulating layer of fat that hides them, sooner or later you're going to have to resort to cardio.

Dave Barry once said the only rule for exercise is that it can't accomplish anything. You can, for example, drive three miles to the gym to run three miles, and that would be exercise. You cannot, however, run to the gym, because that would accomplish something.

The real goal of these types of exercise is two-fold. The first is to burn calories.

And I've got good news for those of who want to burn calories, but don't think you can keep up a cardio pace--the calorie count of what you burn is only a factor of distance. In other words, if you walk a mile or run a mile, you'll burn more or less the same number of calories. It's physics, really--it takes the same amount of energy to move a mass (in this case, your body) a certain distance.

So why do people bother to run? Well, first of all, the guy who ran burned the same number of calories faster. While it may have taken you an hour to saunter that mile, by running you could do it in 10 minutes. If you still run for the whole hour, imagine how many more calories you could burn.

The other reason is your heart. Your heart is a muscle, and just like every other organ in your body, it gets stronger if you use it and weaker if you don't. Since they haven't yet invented a pull-up machine for your heart, the only choice we're left with is trying to make it beat faster once in a while.

It's counterintuitive, I know. Every other object we encounter gets weaker with use. The more you play with it, the more likely it will break down. Our body is not this way. Exercise is the process of consistently pushing the body far enough to strain it without actually damaging it. Amazingly, this wear will cause our body to build up strength rather than break down.

With cardio, the way we set that boundary between strain and damage is with your heart rate. Based on your age, you should do cardio at 75-80% of your maximum heart rate (There are calculators for this).

What kind of exercise should you do? Well, that depends on you. Some people really dig running. I enjoyed cycling for a while. These may be too redundant for you, and you need the variety you could get from playing a sport like raquetball or basketball.

I happen to like aerobics. I really did spend this morning prancing around to Richard Simmons. It's easily self-adjusting--if it's getting difficult, you just don't prance as hard. If it's too easy--well, you know.

So get your heart rate going now. Because as tough as it is to get your heart going with cardio, it beats the alternative.

Sunday Book Review: Millionaire Next Door

Let's pretend there's two kinds of millionaires. The first kind are what are called "leveraged" millionaires. These are the Donald Trumps--the guys who live off borrowed money. These are the guys we always see filing bankruptcy on the news, but who still manage to live in the big houses and ride in the limos.

The second kind are the "equity" millionaires. These are the ones who have scrimped and saved to get where they are. They've cut corners, clipped coupons, driven used cars, and in the process managed to get far enough ahead of the game that their net worth has seven digits to the left of the decimal point.

Now, let's say you're going to do a study on millionaires. And the way you decide to get them to let you study them is to offer them some money to fill out a survey. Which type of millionaire do you think is the most likely to respond?

The Millionaire Next Door isn't so much a "How-To" book as it is a "How-Dunnit." Millionaires were interviewed about their spending habits, lending habits, and other M.O.'s. The results?

Surprising facts like this: The average millionaire lives below their means. The average millionaire drives a used car. Actually, a used economy car. The average millionaire hasn't made a house payment in 15 years.

This book has become the bible of the suburban millionaire-to-be. Nearly every beginners finance book will reference this book.

Is this book entertaining?

Nope. Not in the slightest. It's actually kind of boring.

But that is perhaps the book's biggest insight. The everyman's road to wealth isn't about glitz, glamour, pizzaz or funny stories. It's about doing certain things consistently, month in and month out, until powerful ideas like compound interest and dollar cost averaging work for you instead of against you.

After reading references to this book in every other book in the world, you're going to have to crack it open eventually, so you may as well get it over with and learn it all right from the start.

Clawing My Way Out

Well, I'd been looking forward to today for a while--the day when we'd finally start bringing down the monster, taking the bites out of the elephant, clawing our way out of the hole--whatever analogy seems appropriate to your character.

Today, I went from a guy who's been getting himself deeper in debt to a guy who's getting out of debt. That, in and of itself, is a turnaround.

I started off the day running in the park. I spent the afternoon paying off debt, even getting ahead again on a couple of bills we'd been behind on, and paying off a couple of outstanding bills we'd let sit because we didn't know how or when to deal with them. I'd managed to save a bit extra from my last paycheck, so we were able to do all that. Then, I spent the evening lifting weights with my brothers.

None of it was as great as it could have been. I dropped pine cones every three yards or so in the park and tried to recreate the drill basketball players do where they start at the baseline, then run and touch the free throw line, then go back to the baseline, then run and touch the top of the key, then repeat with the three point line, half court line, and each line until you get to the other side of the court. I'd planned on doing it for 30 minutes, but I didn't even make it to 10.

You can see from the tale of the tape what kind of debt I made in the bills. Not a bad chunk--I'm certainly not upset about it--but not the kinds of numbers that are going to get me out in a year.

My wife made rolls and breadsticks that turned out fantastic, and I had more than I should have. Do you know white flour has 100 calories per 1/4 of a cup?

And lifting tonight, it reemphasized how far I'm behind where I've been before. We worked out back and biceps, and mostly for biceps I just used the bar. My muscles are going to be mean to me tomorrow.

Even with all that, it was exactly the kind of day that this turnaround is about.

Sir Winston Churchill said, "Success is going from failure to failure without loss of enthusiasm."

I'd modify that to say "Success is maintaining enthusiasm even when reality starts to set in." It's easy to imagine yourself thin and healthy, easy to imagine yourself out of debt, easy to imagine yourself living the lifestyle you wanted. It's easy to get excited about those images.

But when it's not just about images in your head, when it's about sore muscles and letting the roll sit there uneaten and foregoing that extra purchase and locking yourself into a budget, that's when continued enthusiasm starts breaking ground on the path to success.

You can't do it all at once, in one grand gesture of working out or paying a whole bunch of money or buying that 80 video set. Explosions don't make diamonds. Explosions make messes. Diamonds come from consistent, intense pressure applied over time.

That's how success is really brought about.

Measuring Holes - How Deep Is Your Debt?

I have to be honest--I didn't know how deep I was in until today. My wife and I had made a few thumbnail estimates, and I knew we were somewhere between $17-20,000 in debt. It turned out to be the upper end of that scale, and was probably above that last month.

It was a far more emotional experience than you'd think. I've actually been excited about this day for a while--thinking about how great it would be to finally start seeing some numbers going down. What I wasn't prepared for was what it was like to watch the numbers pile up as I discovered this bill or that bill I didn't even know we'd had.

My wife and I were both on edge the entire time, snapping at each other. I don't think either of us blamed the other, really, but we both were experiencing that kind of guilty defensiveness you feel when something's your fault, and you know it's your fault, but you don't want anybody to call you on it because it would be more than you could bear.

She behaved far better than I did, and may even have found a couple of transactions that we can get reversed and get us that much further ahead. We won't know for sure until Monday.

In the meantime, the bills were a combination of the serious--there were medical bills on there from my wife and daughter--and the stupid--I can't believe I'm still paying interest on trips to Subway and Quizno's from two years ago.

If you've never done this, do it and get it over with. Pull out all your bills, all your debt, get the balances, and add it up. Use a calculator, use Quicken, use Excel, use Lotus, do it however you want, but get a total.

I'm telling you, it won't be fun. But it's like pulling off the bandage. You may as well do it quick and get it over with. The sooner you know how deep the hole is, the sooner you can start weaving roots together to make a rope so you can climb out.

Tomorrow, I start climbing.

On Feeling in Control

I was talking with a co-worker today who had the same spending problem I did.

Everybody's got something they like to do that helps them feel in control. For my wife, it's getting her hair cut. Even if everything is going wrong in the world, she can still gain a sense of control by making her hair look different.

When I was a teenager, I would buy notebooks. They were cheap, and I would vow that I would fill them with pages of wonderful prose that I could then sell to a publisher and make money.

As I got older, I started buying workout magazines a lot. Buying the magazines was an outward sign that I was going to get in shape. I'd also buy money management books or other books.

My friend today admitted he'd had the same problem--when he was depressed, you could always find him at the bookstore, picking up one book or another.

The last time I lost weight, a big part of what I did was mental. I had to mentally transfer the sense of power that I used to feel by buying things (or by eating things--I'm a stress eater) and transfer it into my weight loss. In other words, my weight loss didn't really become effective until managing my eating and exercise habits began to give me the same sense of power I'd previously found through eating and making purchases.

I still feel you have to do this to create any true change. You can't just change the symptom or change the behavior--ultimately, you have to change who you are.

If a "diet" is a prison to you, one you hate and can't wait to get out of, you're missing the point. As soon as you break out of the diet, you're going to go right back to your old weight and end up right back where you ended up.

We're better at doing this for debt. Credit cards usually get cut up, and situations usually change for the good once we start learning to invest rather than spend our lives as an investment for the credit card company.

But ultimately, the biggest obstacle that stands between us and our real goals is ourselves. Ultimately, if we haven't done something yet, it's because there's still something else we want more. It's either the comfort we get from the food, the security we get from the (false) idea that if we don't try we can't fail, or it's something else.

So we're left with two choices--either we change our level of desire for the thing that's stopping us, or we increase or level of desire and satisfaction regarding the goal.

That's what I did. I mentally shifted the feelings of satisfaction the purchases gave me over to weight management. If I could control nothing else in my life, I could control the food that I ate and the exercise that I did, and that put me in control.

Is this real? Absolutely. There was a while where I could wander around endlessly looking for something to have for lunch, because I'd mentally and emotionally come to reject all the foods that made me fat, but hadn't yet accepted the foods that could make me thin. So nothing looked good to me.

Try it for yourself. Work on mentally changing your associations and emotions regarding your behavior.

Tony Robbins does an exercise on some of his tapes that you can try right now. Check this out:

Think of one of your favorite foods. Any food. In my case, it was one of those Italian chicken sandwiches they used to have at Burger King. It reminds me of trips with my Dad and it was tasty.

Now, on a scale of 1-10, rate how bad you think you want that food item right now. You hungry? Not hungry? How you feeling?

Now, try to raise your level of desire for that food. Close your eyes, and try to raise your desire for that food up to, say, an 8. Imagine the taste, the texture, think about hunger, whatever you have to do to make yourself want that food more than you did a minute ago.

Once you've done that, kick it up to a 9. Imagine whatever you need to, create the emotion, but make it a 9.

Got it?

Now go all the way. Make it a 10. Make it so that you want that food, right now, this second. Imagine it perfect, imagine the best it ever tasted, imagine it in your mouth this second.

Now wait!

Before you run out and get it, turn it around. Imagine your desire going back down. All the way down. Make it a 1. For me, this was easy--just imagine that bun being just a little soggy. Nothing worse than wet bread, to me. That idea of soggy bread turns me off. If your food is sweet, maybe imagine ants in it. Do something to bring yourself down from that 10 to that 1.

I hope you took the time to really do that exercise, because if you did, you'll see that you have more power over your desires than you may think. If you didn't do it, you may be skeptical right now, but I encourage you to go back and give it a try. It works.

You can affect your desires.

Weights and Measures

To those asking when I'm going to update the "Tale of the Tape," I, um, already did.

Yup. I lost a quarter of a pound and 1/8 of an inch. Not enough to register on this chart.

Not all that phenomenal.

But, it leads to the question of why I measure and don't just weigh. Why should you use a tape measure as much as a scale for tracking weight loss?

It's because all weight is not created equal. Just like people talk about "good debt" vs. "bad debt," there is good weight and there is bad weight.

The good weight is muscle. The bad weight is fat.

Now lots of people (particularly women) are afraid of muscle, because they think that women with muscles look like the pro wrestler formerly known as Chyna. This simply isn't true. The pro wrestler formerly known as Chyna was engineered by scientists in a lab. It would take a lot more than a couple of 10 pound dumbbells to turn you into Chyna.

Putting some more muscle on your body gives you several benefits. Mainly, it takes energy to maintain muscle.

Think of your body like you would a pet store. The fat is like all those bags of pet food. They just sit there, waiting for somebody to buy them. Until then, they will sit there forever, waiting patiently. That's how your fat is. Until your body gets around to using it, your fat doesn't do anything but wait. And as most people know, fat can wait a long, long, time.

Muscle, on the other hand, is like the kittens and puppies and Gila monsters. It needs to be fed to stay around. It takes energy (or in other words, it takes calories) to maintain muscle.

So if you make sure and buy a little less pet food than you need, you're going to have to start cracking open some of those bags you have lying around in order to feed the animals. The more animals you buy, the more feed you'll have to pull off the shelves.

Not a good way to make a pet store profitable, but a great way to lose fat.

So you could, in theory, lose one pound of fat and gain one pound of muscle and stay the same weight. This would be a good thing, because you'd now be burning more calories each day to keep that muscle.

And sometimes dieters will throw this excuse out there. I probably would have been tempted to throw it out there, seeing the results I saw this week.

"Yeah, I didn't lose anything, but I'm probably just gaining muscle."

That's where the tape measure comes in. If you're losing fat, it's going to show when you measure. As a very general rule of thumb, for every inch you take off your waist, you've lost about four pounds of fat. Figure about a quarter inch for every pound.

This is also a good thing mentally, because it gives you twice the opportunity to get good results. If you lost weight on the scale, great. If you only lost a little on the scale, but lost a lot on the tape measure, that means you're losing the bad stuff and gaining the good stuff. You still get to celebrate.

Don't have a tape measure? That's okay. There's a handy measurement tool that you already use every day that's almost as good--your clothes. Even if the scale isn't responding as fast as you like, the fact you didn't have to lay on the bed and hold your breath to button those pants is a terrific sign. The way your clothes fit is a great way to track your progress, even if you don't have access to a scale.

Of course, if you get results like mine, the tape-measure back up takes away any excuses you might have had, and forces you to be honest with yourself. I can take comfort in the fact I've stopped gaining. But to make the turnaround, I'm going to have to step it up a notch.

The Simple Starter Diet

Okay, I've received a lot of questions about diet. What's the best diet to use to lose weight?

Well, in some ways it will take me all year to answer this question. But if you want a fast, easy answer, here's The 365 Day Turnaround Simple Starter Diet.

Step 1. Make a list of foods or food combinations that have less than 300 calories each. Start by looking at the foods you normally eat, then expand the list from there.

Examples:
1 cup of nonfat Yoplait and 1 cup of nonfat cottage cheese: 290 calories
1 apple and 1 cup cottage cheese: 220 calories
Healthy Choice Classics Frozen Dinners: 250-300 calories
Wendy's Spring Mix Salad and Reduced Fat Creamy Ranch Dressing: 280 calories
Wendy's Small Chili w/ 2 saltine crackers: 225 calories
McDonald's Chicken McGrill, no mayo: 290 calories
McDonald's Apple dippers w/lowfat caramel dip and McDonald's Fruit & Yogurt Parfait: 260 calories
Subway 6 inch Savory Turkey Sub: 210 calories
Two Fudgesicles: 208 calories
Krispy Kreme original glazed: 200 calories
1 cup Vanilla Ice Cream: 265 calories
Baskin Robbins Pralines and Cream Ice Cream Bar: 280 calories

Step 2. If you're a guy, eat something off your list six times a day. If you're a girl, eat something off your list five times a day. Try to spread it out as much as you can, but if you miss a meal, double up on the next one.

Step 3. Don't eat or drink anything else except water. Drink two cups of water with every meal, and as much more water as you would like.

That's it! An eat-anything-you-want diet that you will lose weight on. It's good for people who are busy or on the go, because nearly every fast food restaruant gives out "Nutrition Guides" and store bought food has the nutritional info on the side. You just find something with under 300 calories, and you're good to go.

Wait, you're saying. Can I really lose weight doing this?

Yup.

But there's ice cream and stuff on that list.

Yes, but remember, diet isn't really as much about food types as it is about calories. If you eat less calories than you burn, you'll lose weight. This diet is designed to provide less calories than a moderately overweight person would burn, but still enough to keep them going. You'll lose weight, and have energy.

How much weight will I lose?

Well, that depends on a lot of factors. How much you weigh, how tall you are, how much you exercise, and how old you are.

And if you're not at least moderately overweight, this diet may not work for you at all. It's not designed to fine-tune away those last four or five "vanity pounds."

Ah-ha! I knew it wasn't as simple as you said.

Look, if dieting is an art, this is a paint-by-numbers. If you do a paint-by-numbers, you'll still end up with a painting. It just won't be as creative as if you'd done it yourself, but it will still be a painting.

So how much more complicated is diet, really?

As complicated as you want it to be. Not only could you get into counting calories, you could get into counting carbs and protein and fat, even counting milligrams of vitamins and minerals. Some people do math to try to keep these things in exact proportions. If you're a retired accountant looking for something to do, you could spend the rest of your life managing the numbers of your own diet--if you were really, really missing number crunching.

For normal people, even if you want to count there's really no need to look at anything more than calories, protien, fat, and fiber (The carbs will magically take care of themselves if you do this--but that's another post). A good multivitamin will keep everything else covered.

Is there a way to diet that doesn't involve counting?

Yup. Books like Body for Life and The Zone talk about "portions" instead of calories. A portion would be about the size of the palm of your hand, or the size of your closed fist. A portion of potato would be a potato the size of your fist. A portion of chicken would be a piece of chicken the size of the palm of your hand.

Using this system, you try to have a "portion" of protein and a "portion" of carbs at every meal. The protein should be a lean meat, like chicken breast, or perhaps a low- or non-fat cottage cheese. The carb should be something low sugar and low fat, but high in fiber, like whole wheat bread or a piece of fruit the size of your fist. Eat this five or six times a day, as outlined above. Three or four times a day, add in a portion of vegetables.

Wow. Eat meat six times a day? Isn't that a lot?

Yup. But it's not that much each time--that's the key. Just a handful of protein and a handful of carbs.

Okay, when you put it that way, it doesn't sound like very much.

It's more than you think. And if you're hungry, you can drink more water, or just hang tight for a while. When you're eating five or six times a day, you're never more than a couple hours away from your next meal.

An ideal "meal" in this diet would be some grilled chicken and onions served up in half a whole wheat pita.

Does this "portion" diet really work?

It works, but it can be hard to do, especially if you're on the go. To ease it up a bit, most people swap a few of the meals with some kind of meal replacement shake.

I will say that in practice, it's usually little high calorie, so you may have to exercise a little more than you would on the "Simple Starter Diet."

But you should really be exercising anyway, so what difference does it make?

Don't get snooty with me. You're the one talking to yourself.

I'm blogging to myself. Believe me, that's far more common.

On Unexpected Expenses

The situation Saturday ended up going better than I could have hoped for. Thanks to some very sweet anniversary gifts, not only did we get to replace the window, but we also got to go the movies on Saturday night. It was incredibly sweet.

But it brings up the subject of unexpected expenses. If you're so tight you're barely able to get through the month, and you're trying to get out of debt on top of that, what are your options? How should you figure unexpected expenses into your budget?

Having a plan will take some of the nail-biting out of each month--your heart should only be racing when you're exercising.

You have a few different choices.

1. Leave some elasticity in your budget. Make sure, when you create your budget for the month, that there is a certain amount of each check set aside specifically for problems.

Pros: The money is available each month. Also, if a utility bill or two turns out to be more expensive than you expected, you're still covered.

Cons: The amount you're able to set aside each month will probably be pretty small--smaller than your typical emergency cost.

2. Get $1,000 set aside for emergencies. Do whatever you have to--sell something, cash out something, scrounge it up, whatever you have to do--in order to get $1,000 cash ready to go for emergencies. This is what Dave Ramsey recommends, and he does recommend it be cash, the one form of currency that's still good everywhere.

Pros: The mere process of getting the $1,000 together will teach you that you have access to money in more ways than you think. And knowing you have $1,000 ready to go to pay for an emergency room trip or whatever other thing cropped up--well, let's just say you can sleep the sleep of the just.

Cons: Depending on what your highest interest debt is, and how much you owe on it, that $1,000 could be costing you more than $250 a year in interest.

3. Keep a credit card for emergencies. Two things make a good emergency credit card--low interest rates, and low spending limits. The low limit puts pressure on you to pay it off before the next emergency--and the low interest rate saves you money. If you pay it off before the first billing cycle, that first month will often be interest free.

Pros: The maximum amount of money is put towards debt reduction each month. This emergency tool only costs you interest if you use it.

Cons: It's still a credit card, and inability to discipline yourself with a credit card may be what got you in a bad financial situation in the first place. If you max out every card you get your hands on, this option probably isn't for you. And if you don't have extra money to pay it down figured into your budget, how would you pay it anyway?

What's the best one? Who knows. As you can see, they all have their advantages and disadvantages. What you should think about is what type of system you used before you changed your financial outlook, and try to recreate that without the pain.

For example, if a $300 payday loan usually took care of you, then wait for a month where you didn't need to get one, and set aside the $300 you would have given the payday loan company if there'd been an emergency. Now, the next time there's an emergency you can borrow from yourself. If you have the discipline to pay yourself back as faithfully as you would the payday loan company, you'll never have to use them again.

As for me, I'm trying a combination of the three. I have a certain amount factored into the budget for unexpected expenses. Since I don't know how soon I can scrounge up the $1,000, for right now I have a credit card with a low interest rate and a $500 limit I know is there for me. Once I scrounge up the $1,000, I'll probably stick with that--the $200 or so dollars a year in interest it costs me is worth it to be able to sleep at night without worrying about what I might have to pay for tomorrow.

Sunday Book Review

. . . . . . .

It's easy to review these two books together, because they're so similar. It's obvious that Dave Ramsey had seen Bill Phillip's excellent Body for Life when he wrote Total Money Makeover. The layout of the two books is the same, the nuts-and-bolts, no-frills, no "trick" advice is the same, and the solidity of the facts is the same.

Bill Phillips was a pro bodybuilder who decided to start a fitness company for the average Joe. Body For Life is a distillation of his bodybuilder knowledge compacted into a program that you or I could do.

Dave Ramsey has dabbled in all kinds of financial techniques, from "Nothing Down" real estate to day trading, and has finally settled on a batch of basic, no-risk financial fundamentals. And I do mean no-risk--there are no get-rich-quick schemes here. He likes to brag he gives, "The kind of financial advice your Grandma would give you."

If you want the two books that best combine the most basic of foundations with the most solid production of results, they're probably right here.

Both books dedicate long sections to dispelling "Myths" about health and finance, ideas that are considered to be sane in the conventional wisdom, but are actually nonsense. These chapters alone are valuable to anyone who's just starting on a fitness or financial journey and trying to get a handle on what's true and what's not.

But these books don't just toss around ideas--they're also handbooks. They contain step by step instructions on how to implement the ideas they teach. In other words, they tell you what to do, today, to find yourself in a better place, physically or financially, than you were before.

Both books were also originally marketed as "contests," and the people who got the best results were given prizes--or will be, because even though the deadline for Total Money Makeover has passed, the winners are still being decided.

I don't agree with everything in these books, and some of it may not be practicable in your current situation. For instance, to do the Body For Life workout as outlined would require access to dumbbells. Canceling the gym membership was one of the things I did to save money. But with his explanation of principles, it becomes easier to adapt the program to my (or your) current situation.

It was Body for Life, along with The Business Plan For The Body that helped me lose nearly 50 pounds two years ago. Look for a review of the second book in a few weeks, but in the meantime, here's the first one.

The Debt Consolidation Company Road Bump

So around November, my wife started looking into debt consolidation companies. She’d been handling our finances, and she could tell that we were overextending ourselves. When she came to me about it, I started adding up the numbers and realized she was right—we just didn’t have the cashflow to pay for all the bills we had each month.

If you’ve never used one of these places, the scenario is basically like this:

They work out a plan they think they can negotiate with your credit card companies based on what they’ve been able to get for other people before. They “consolidate” this into one easy, monthly payment.

The first month, they keep the entire payment for themselves. This pays for their bills and the month you’re late on your credit card payments gives them leverage with your credit card companies to get a lower monthly payment, lower interest rates, and waived late fees. Sounds great, if you don’t mind the hit on your credit rating—I’ve heard a lot of credit providers view debt consolidation the same way they view bankruptcy.

It’s really nothing you can’t do for yourself. I’ll post more about what I probably should have done instead sometime, but at the time we were so behind we felt like we had no choice.

There’s a million companies out there, and it’s not the kind of thing they have at the mall. We found one of them on the internet and set it up.

The name of the company is Pinnacle Financial Management Corp.

So first month comes and goes and we start getting letters from some of our cards (we had four) stating that they’ve accepted the terms of the offer. One card, though, never sent a letter. They sent letters saying things about how we needed to hurry and pay.

It didn’t seem to be a problem with the card provider—one of the other cards was from the same provider, and they’d accepted that offer. When we called, the provider told us they hadn’t heard from Pinnacle yet.

The month drags on, and still no payment on any of the cards. We start to worry, and we start making phone calls. My wife leaves messages on the voice mail of the guy who helped her set up the account, who was, apparently, pretty cool.

Days go by, and none of the calls are returned. At this point, we’re both worried. Flashing neon signs are blinking in my mind, and they all read “SCAM.” Next time we call, after we get the answering machine we click over to the operator. There’s a message saying they’re on holiday until the first of the year. We leave a message anyway. Sounds like a relief, but there’s still that nagging voice in my mind saying a week-long holiday is a great way for scammers to make a getaway.

Finally, on the 29th, we get a letter from one of the card providers stating that since our provider had failed to meet the outlined terms and we were being dropped from the program. This, combined with the other card that still hadn’t sent word they’d ever received the offer, put me over the top.

These guys might be on vacation, but somebody had to be home. I sent the kind of email I was sure would get a quick response from anybody who happened to be there, even if it was the janitor. It basically said I was concerned about the legitimacy of their company and that if I didn’t get my phone calls returned by the first (the day they were going to be back anyway) I would go on every internet financial forum I could find and post my experience with them, and that from there I would do whatever else was necessary to rectify the situation.

Did it get me a quick response?

Yup. At 6:45am Monday morning, two days after this blog went live, I got an answering machine message from some guy named Joseph saying that he’d got my email with my concerns and that he was going to drop me from the program. If I posted anything on the internet about my experiences with him, he’d get his lawyer to sue me for slander.

Yeah, you read that right. This guy’s way of reassuring a concerned customer was to cut him off at the knees.

My phone call back to him was an insane argument—the kind of argument you’d expect to have with your little brother—about whether my email was too mean for him to be able to continue to do business with me.

And this wasn’t just some poorly trained customer service rep. This guy assured me during the call that he was the owner of the company. The owner of Pinnacle Financial Management Corp. was going to cut me lose for fearing his company wasn't legit.

Once I finally calmed him down (yeah, you read that right) he explained to me the delays that happen in each month because of the ACH’s.

Now he was speaking my language. I understand completely about ACH’s—electronic debits—and how after they happen, there’s a seven day delay that the person who withdrew the funds isn’t allowed to consider them “collected.” Since there are two ACH’s—one from us to Pinnacle, and one from Pinnacle to the debt consolidation service—that’s a two week delay from when his company gets the money to when it posts at the providers.

The letter from the credit card company was a mistake on the credit card company’s part.

Now, I can safely say our banks have received their payments. The whole thing’s been worked out fine, and the road bump’s over.

At least, I hope it is. Because in the back of my mind, there’s still this little blinking sign plugged into the memory that my debt consolidation company’s owner sounds like a 20 year old kid in his garage.

But what the heck. I’m a 20 something paranoid kid, too. At least for another seven months. And if this guy’s getting his own company going—well, I hope that’s where I am in a couple of years. Power to him for being that far ahead of the game. I’m envious.

Of course, if he screws me, my offer still stands.

Shouldn't Have Said Anything

Okay, you remember that emergency I was saying wasn't in the budget?

Well, this morning, after discussing various ways my wife and I could divert a couple of bucks from the budget to do something fun for our anniversary on Saturday, I headed for my car to go to work, only to discover the passenger side window had been smashed in. The contents of the car had been turned upside down.

What were the bad guys after? Did I have my much discussed and top-secret weight loss and debt reduction plans in the car? Were they a druggie, desperate for a fix, who had spotted money through the window? What were they after?

A remote for the gate.

It's the second time it's happened. At our apartment complex, you need a remote whether you're coming in or going out and while there's plenty of people to let the remoteless in during the early evening, by one or two in the morning waiting for someone could take a while. That frustration can drive people to other, less time-wasting alternatives, like smashing somebody's car window and taking their remote.

Somehow, causing over a hundred bucks damage to my car for a $15 remote seems sensible to people in the middle of the night.

I was frustrated, but not too worried. We'd just discussed ways of redirecting a few bucks to do something this weekend. Now we'd have to change our plans, but we already knew where to get the money.

Except that when we further researched, we discovered two things. First, glass was way more expensive than it had been when we'd bought it in April (Why? Did the war in Iraq cause a glass shortage? Or because people with broken windows are more desperate when it's raining?). Also, a $58 uncollected bill from last month was suddenly pulled from our bank account yesterday.

Yikes. It looked like the "anniversary savings" was gone before we'd even figured out how to save it. And that left us with just enough money for next week's gas.

So, how to handle it . . . Hit up my folks for some money? Get a payday loan? Ask my boss for a loan?

No. Spending money I didn't have is what got me into this mess in the first place.

So I'm choosing option D: None of the above.

I don't have the money, so I'm not fixing it right now. For the next week and half, I'll drive with plastic over my window. I'll keep a towel over the seat to fend off some of the heavy rain we're supposed to see.

That's just how it's going to be. I've decided on my priorities this year, and not having plastic and duct tape on the window of my car isn't on the list.

The Three Keys

There are three things you have to have before you can accomplish something:

Desire

You've never done anything in your life that you didn't want to do.

It's true.

Now keep in mind, I'm not saying you were excited about doing it, or that it was the thing you wanted to do most. You might have been motivated by fear of consequences (like getting fired) or by emotion (in that you didn't think through the consequences, but acted impulsively), but for some reason, good or bad, you wanted to do it when you did it.

I'm also not saying you wanted all the consequences. An abusive husband may not want his wife to leave him when he hits her, but at the time, he wants to hit her, for whatever reason his sick mind has dreamed up.

But at some point, you have to muster up enough excitement, anger, fear, logic, or insanity to want to do whatever you do. If you don't, you just don't do it.

Discipline

The magical thing about discipline is that discipline actually decreases the amount of desire you need to accomplish something.

An undisciplined person might need a lot of factors to enter the picture before they're willing to start making changes. Maybe it's creditors calling every day, maybe it's a doctor warning them about the health risks of their lifestyle, maybe it's something else.

Discipline is about a balance between your natural man instinct to get by with the minimum amount of effort and the inherent desire for greatness most of us possess--the desire to be the best we can be.

Discipline is a matter of overcoming those natural tendencies to, as the saying goes, put off what we want now for what we want most.

Knowledge

Of course, desire and discipline are worthless if you don't know how to do whatever it is you're striving for. So a little bit of learning may be necessary to get us where we want to go.

We live in an age, though, where we suffer from both information extremes. Sometimes we know absolutely nothing about things.

Other times, we suffer from information overload. One study will say a high protein, low carb diet is the way to go. Another study will say a low fat, low sodium diet is the way to go. Yet another study will say you only have to eliminate sugar.

Is it better to get out of debt, or to build monthly cashflow by leveraging? Is it better to do cardio or weightlifting?

Hopefully, this year I'll sort through a lot of that by experimentation and explanation. We'll see what medical science backs and what it doesn't, and we'll even see what works and what doesn't in the brutally honest laboratory of real life.

But the knowledge will only be part of it. The other two keys, desire and discipline, are just as vital to the process as knowing how to do it.

In my case, the weak link has always been discipline. There's no good time for exercise. Rolling out of bed to exercise in the morning is hard. Exercising after a full day's work is hard. I read a study that said the optimal time for working out is 4:00 in the afternoon. Who's got time to exercise at four in the afternoon?

Not me.

That's part of why I created this blog. It creates accountability. My measurements, weight, and (Coming Soon!) my debt are right there in the corner for everybody to see. The increased pressure increases my desire and motivates me to be better disciplined.

If you haven't done something yet, you have to figure out which of these things is stopping you. Resist the natural inclination to find an external obstacle. If you have one you've been blaming, think about which of these three keys you'd need to overcome that obstacle.

Do you need more knowledge, to know how other people got around it? Do you need more discipline, to divert resources from other parts of your life into overcoming that obstacle? Or do you need more desire, since your desire to cling to the obstacle are so great?

Speaking of Ads

I'm really excited about my newest sponsor, Tabasco.com (McIlhenny Company).

You may wonder what Tabasco has to do with a diet and finance blog.

The last time I succeeded in losing weight, I used Tabasco on practically everything. I had read somewhere that eating spicy foods can increase your metabolism, so I used to spice up all the bland stuff I was eating.

I know that to Tabasco purists this may sound like heresy, but as much as I like the original my favorites are the flavored kinds. The Green Pepper Tabasco has a fun texture and the Habanero Tabasco has a lot of kick, but enough fruit to keep it flavorful.

So go spice up your diet.

Why Ads?

You’ve probably noticed this blog is plastered with ads. More so than other blogs you’ve probably glanced at.

One of the primary goals I have for this 365 day turnaround is to get out of debt. And when your debt represents more than half your yearly income, you can’t get out of debt in one year without taking drastic measures.

One of those drastic measures is getting a part-time job. At least until such time as the debt situation is resolved.

So I’m taking a risk. I’m making writing my part time job.

Rather than loading boxes at Wal-Mart, I’ve chosen to try to make money blogging.

Now if you know anything about blogs, you know that a blogger’s typical income compared to that of a Wal-Mart stocker is something like my current salary compared to that of oh, say, Bill Gates. “Wealthy as a blogger,” is not a phrase you hear bandied about a lot in Wall Street circles.

But sharing my experiences with you is far more satisfying to me than loading kitty litter onto shelves in the middle of the night. So I’m giving it a shot. This and a few other writing projects are my shot at that few extra bucks I’ll need. I’m going to give what I’ve got to making the information on this blog valuable to you, to make the other things I’m writing the best they can be.

Will I have to do the kitty litter thing before the year is out? Who knows. But if I do, you’ll hear about it.

In the meantime, I have ads here.

Because I really am an optimist.

Updated Tale

In my quest to find my true weight, I have finally settled on a scale. Worried about the inaccuracies of the various scales I encounter in my own home and those of the folks who allow me into their homes, I have used my highly placed and confidential connections to gain access to the "True Weight" scale in the department of Weights and Measures for San Bernardino county. My updated weight is at right. It will be updated once a week.

(Thanks, Dad.)

Thanks

I want to thank a couple of people for linking to my Blog.

Becky, the PhotoNinja, posted about it here. Like she says, it was in large part her success this past year that inspired me to do something like this, and I thank her for her example and support.

It is perhaps because Froggie and I share a birthday that she and I so often find ourselves dealing with the same issues at the same time--after all, when you're in sync on both the western and eastern zodiacs, that means you're doubly sure to have the same horoscope every day, right? Right?

Thanks to both of you, and to those who've emailed me, for your support and for being so cool.

Oh, and welcome to everybody surfing in from Musings From The Doc. That guy's alright, too.

Number Crunching

Debt reduction and weight loss are both about numbers. It's math, really. And the equations are pretty much the same.

When calories burned are greater than calories eaten, you lose fat.

When the money you bring in is greater than the money you spend, you can pay down debt and build wealth

End of story.

It's amazingly simple.

Well, not really.

Because nowhere do those equations consider that there's this strip across my abs, right above my ribs, that feels like it's about to pop because of sit-ups I did yesterday morning.

Nowhere do they consider that I have to spend this month praying there's not one single emergency because it's not in the budget.

Yeah, on one level it's just math. But I've never had so much emotion tied up in a math equation.

Now just because the process ain't easy doesn't mean we can't use the formulas. If weight loss and financial freedom come down to two factors each, we should do everything in our power to take control of those factors.

Take the fitness equation. Usually when we think of weight loss, we talk about "diets." And diets work, in theory. Regardless of whether we did one tiny smidgeon of exercise, if we merely ate just a wee bit less than we burned, we could lose weight.

However, there comes a point where you hit a wall. You can't stop eating altogether. Despite what this diet or that fad will tell you, your body really does need fat, it really does need protein, and yes, it really does need carbs. You can't cut back on all calories completely or your body would start reacting in odd ways like, well, dying.

It's the other end of the equation where we have greater potential. There are billions of things you can do to burn more calories. Simple things like parking farther away from the store. I read somewhere that drinking ice water burns calories because your body has to heat all that chilly liquid up to 98.6 degrees. You can also:

1. Exercise. Duh.

2. Build muscle. Your body has to burn calories just to keep muscle on your body. That means you'll be burning more calories even when you're just sitting around.

3. Eat more often. Note that I didn't say eat more. Just eat more often.

4. Fidget. Every movement burns calories, so do some movement. If you're watching TV, knit or cross stitch, whatever floats your boat. I practice card tricks.

The list could go on, really, but that's another post.

The point is, once you simplify the insanely emotional factors involved in these things down to an equation, it brings some order to the emotional chaos.

Before I started thinking of money in terms of this equation, I thought saving money only meant cutting back. I had to find ways to live more cheaply. Believe me, I'm doing that--you'll hear about all the ways I'm doing it as the days go by. But even if I was able to completely eliminate all possible expenses--If I got my room and board free, if I got my food free, and if somebody filled my gas tank for me, I would still be limited in how much I could save. I'd be limited to my salary.

As with weight loss, it's the other side of this equation that has more potential. The amount by which I could potentially increase my income is far greater than the amount by which I could potentially reduce my expenses. In fact, in a perfect world, my potential for income would be infinite.

Of course, there's really small number in my Quicken register reminding me this isn't a perfect world.

But by realizing both weight loss and financial independence come down to two factors, you can save yourself the frustration of trying to solve either one with only half a solution.

Because that would be like riding a one-pedaled unicycle.

Before Pictures

I took a before picture today.

No, you can't see it.

Well, not yet anyway. For right now, it's just going to sit there, festering.

Before pictures are not meant to be shared. If you want to know how bad the situation is, check out the "Tale of the Tape."

Some of you may not know that there is an art to before and after pictures. When you see a "fitness contest" in a magazine featuring before and after pictures of people, you may not know those people are fitness models. Just like some people make a decent living by winning writing contests, some people make a decent living by entering fitness contests.

Most bodybuilders go through two phases in their training: a bulking phase and a cutting phase. During the bulking phase, they eat tons of calories, so they can gain weight. They want to gain muscle, but they know their body isn't that specific about where it packs the calories, so it gains a lot of fat as well. When they hit the peak of this phase, they snap a "Before shot."

From that day on, they cut back like mad, trying to trim that fat while keeping the muscle. Naturally, some muscle gets lost, too, but overall, they end up looking hot and winning the contest, while you busted your tail back home, thinking the contest was meant for "amateurs."

Some of the keys to taking a good before picture:

Load up on sodium for a few days before you take the picture. Also, drink a lot of water. The increase in sodium will increase water retention.

Look sad. Don't comb your hair.

Try to position your arms in such a way that they are partially obscured by your belly. This will hide your already-buff arms, making them look smaller, and make your belly seem even bigger.

While you don't want the "before" picture to look professional, try getting your professional photographer buddy to take the picture. He's probably got a lens with a slight "fish-eye" distortion, which will make you look even rounder.

To be honest, I didn't do any of these things. I may have looked sad and not combed my hair. But basically, I just stuck a digital camera on top a dresser, took off my shirt and set the timer.

Truly, though, I mean it about you not seeing it yet. "Before" pictures alone are just depressing.

It is now my job to start producing some pleasing "After" photos.

My Lot In Life

So I guess the first question is, where am I starting from?

Money

Money’s a real personal issue, and what almost stopped me from doing this blog.

Weight, after all, isn’t really a secret. No matter how well your clothes fit, when you’re toting 60 extra pounds, everybody can see you’re overweight. But when you’re sweating whether that last check going out will hit the bank before that next check coming in, you can grit your teeth and try to look like you’re smiling and nobody will be the wiser.

Trumpeting your financial situation seems to go against something ingrained in us as Americans. If you’re making lots, admitting it seems like bragging. If you’re making little, admitting it seems like you’re either asking for sympathy or, well, embarrassing yourself.

And I’m still not going to start tossing exact figures around. Anybody who works a 9-to-5 for a salary knows the conflicts it can create in the workplace when co-workers start finding out each other’s salaries, and I’m hoping that this blog will get popular enough that at least one or two of them will find their way in here.

I will say that I've got close to $20,000 in debt, and that my debt represents more than half of what I make in a year. Even when I created a monthly budget for myself based on the absolute minimum necessities of life, I still ended up about $140 short in my monthly cashflow.

So how much I make doesn’t really matter so much as the fact that at the end of the month I’m about $140 short of where I need to be. The proverbial, “Too much month at the end of the money.”

Whatever salary you’re making, whatever salary I’m making, that’s probably a situation you can relate to.

Weight

I’m in shape. Round is a shape.

I’ve seen that joke attributed to everybody from Steven Wright to John Mendoza.

Whoever said it, I feel you, brother.

Right now I’m on a collision course with 275 pounds. In fact, I may have already hit that and smashed through without noticing. My weight’s yo-yoed so much that if you watched a timelapse film of belly since I got married it would look like a pulsating egg-blob in a science fiction movie.

Okay, I’ll admit that imagery was sort of . . . not pretty.

But to one degree or another, I’ll bet you have some idea where I’m coming from here, too.