since he now seems to promote multimarketing so heavily (since of course he makes a nice royalty on books sold) he understandably has “very little credibility” on this message board. If we can seperate or disassociate him from MLM’s for the time being though, I’m interested in peoples thoughts about the financial advice contained in his books. I’ve read several reviews of his books on Amazon.com and the responses ranged from “this is the grestest investment book ever written” to “what a piece of garbage”. I’ve read two of his books myself and they seemed to contradict almost all of what I’ve read in other financial books. So I guess what I’m saying is, I’m confused enough to not know what I should believe anymore. Either he’s right and the rest of the authors don’t know what they’re talking about or vice versa. As someone who’s obviously concerned about his 401k, mutual funds etc any feedback would be appreciated.

Recommend more than $1,000 for some

economic areas and if you make more than a certain income. Most people who have debt don’t have much in savings. His main goal with the “thousand dollars in the bank” is to make sure that when you cut up your credit cards and the car gets a flat tire, you don’t go looking for the crazy glue! The thousand dollars is just a safety net. I agree that if you are in Baby Step 2 for more than 18 months, you have a good chance of getting hit with a Murphy issue. We were in Baby Step 2 for 5 1/2 years. Luckily our $1,000 got us through. But we had to do a lot of juggling when we got hit with a big bill. I would have had a bigger savings or paid off our debt sooner, but having self-employment income and a spouse with different ideas, there were lots of compromises along the way.

The faster you pay off your debt, the better off you will be. Then you will be able to put that 5K back into your savings quickly.

I do think that makes sense except that

not all of us that are in debt have debt but no savings. I already had about 6 thousand in various savings accounts when I found DR. I know that it sounds a little bit odd, but that is from putting 50 dollars a month into an account that I started years ago.

So, DR would say to pull 5 thousand and put that towards debt, but long term all that does is make me more anxious and actually more irresponsible. I have two young kids and I live in one of the more expensive areas of the country. Nowadays, if an appliance went out, it would take nearly the whole amount to replace it – the same for some car repairs.

So, even though step one is not meant to provide security for job less, I would see myself as an irresponsible parent if I did not worry about that in the reality of the current economy. The reality is that losing a job is not any less likely to happen while you are in baby step two than at any other time. If you have enough to live for about one month, that allows you to stay on your feet while you work on the details of surviving.

I listen to different financial experts because it helps me to stay motivated. Susie Ormann recommends 8 months of an emergency fund before worrying about paying off debt. I can’t get behind that either because I worry about paying so much in interest while saving that up. So, I’ve settled for an in between. I am just not touching the savings and treating that sort of as sinking funds for some areas while I pay things off. I do have some sinking funds, but not as many as I plan on having once the debt is paid off.

I guess the issue really is that you need to be flexible – that should be a rule in life. I take the DR steps as guidelines, but if we cannot adjust them to fit our individual needs, then what good are they? If I had to settle for only one thousand in baby step one, I would abandon his plan. Doing that would cause me so much anxiety about being able to provide for my family that I couldn’t do it. Now, if I were a single person and lived in an inexpensive area of that country, one thousand would be just fine.


Weaning yourself off of credit cards and saving up a thousand dollars is also a mindset alteration. Changing the way you THINK is part of the process.

Even putting up 1000 cash money not to be touched…

is hard for some, especially when you’ve been used to charging things. To have that type of liquid money is the point of the BEF. Even now, some people keep the BEF in their checking account as a floor… but for most, no matter whether they are a single person or a family of 10, getting their hands on 1000 cash quickly is a challenge to overcome. If you can get that 1K quickly, then maybe it would make sense to double it and leave it untouched.

When we moved

the stove top, oven, dishwasher, hot water heaters, and garbage disposal were all old … all probably 20 years old. If they all died very close to each other, it would be a hardship to replace them all at once. Sure, we could do without a garbage disposal and dishwasher for a while but not a stove and oven. In fact, when we bought our home we knew the oven did not work at all and we took that into account when making an offer, plus the fact that other appliances were old as well. Oh, and the trash compacter had died as well. We never intended to replace it though. We removed it and put it at the curb.

Our deductibles for health insurance are ever increasing…. a family ded. of $15,000 on dh and me alone. Dd’s insurance is separate. We have an HSA also that we use for anything over about $100.00. We pay for maintenance meds out of the regular budget.

We definitely need to build our auto repair and maintenance sinking fund. Will try to find a way to carve some out of the budget for that.

I totally agree with this about the geographic location

Certain areas, the northeast and California in particular, seem to have higher expenses than smaller towns, the midwest and the south. I think the number of people in the household plays a part. More people to have accidents, get sick, need school supplies, braces, etc. We are family of 3 and dd contributes to the household budget by paying rent & is paying us back for her car. (We paid cash for it.) It helps but I believe one person could live on less than what it takes to operate a household of 1, just like it’s cheaper for us than a family of 6 or 7.
I think the larger your home/property the more you need for emergencies. There is more that could go wrong when you have 3 or 4 bathrooms vs. 1 or 2. If you have acreage vs. a city lot there is more space for things to go wrong and possibly more opportunity for liability with someone getting hurt.

I agree $1000 is not a lot for some people

Geographic location and number of people in your household matters too. If a single person has $1,000. It can go much farther than a family of 6. That is because there can be more “unexpected expenses” when you have other people’s health and vehicles to attend to.
Our DD just got her cell phone stolen off the bus a couple of days ago. The deductible was $150. I took that from our BEF because I’m scrapping my budget now to complete my Christmas shopping and didn’t want to take that from our working capital. After Christmas is over, I can budget in my January budget to put that $150 back. In the past, I would have just charged it on my credit card. Since I don’t have those anymore, I use my BEF for that purpose.
Other emergencies like car repairs, household issues like broken appliances, and health deductibles could be drawn from a sinking fund. We know we have a $3,600 deductible for health issues, we put money into our HSA for that purpose. We do not draw that out of our BEF. Same thing with car. I put money every month into a sinking fund for that. Appliances could be another category especially if you know your water heater, frig, or dishwasher are 18 years old!
It’s all about planning for those things. I rarely use the BEF.

I think one of the reasons DR has set the BEF so low

is that when folks are getting started, it’s a smaller number for them to wrap their brains around. I know when I went through FPU, the thought of arbitrarily setting aside $1000 was huge; at the very edges of what I thought was possible. It was a struggle to do so with the money I had available at the time. Later on as our understanding of the DR methods increased and matured, and our commitment to following those methods strengthened, then we had the tools to go make that amount bigger. It was, in every sense of the word, a set of baby steps. Had we been told up front that we’d need several thousand in savings for Murphy, and we had to have that step done before we could progress further, we would have stopped right there and written off the whole thing as “can’t be done.” So I think it’s deliberately small to start with. As folks come along in their “working the method”, they’ll figure out how big it really needs to be for their own circumstances, and act accordingly.

The BEF is NOT designed for job loss

It’s for the fridge going out, or the car breaking down, or a burst pipe in your basement. The FFEF(step 3, 3-6 months of expenses) is the one that you would turn to in case of a job loss. If you want to make the BEF $1500 or $2000 based on your level of concern, that’s cool. I wouldn’t suggest more than that, though.

I guess

I didn’t realize that it had not been adjusted for inflation. I know it seemed small to me as well. I figure there is a formula to see what it would be when adjusted for inflation but I don’t know how to do that over the top of my head.

One of the things that I have never been comfortable with is how small baby step one is

One thousand dollars has not been adjusted for inflation at all since DR set up the program. In my area, that would have me on the street within a month if I lost my job. So, I’ve settled for the idea of having one month’s worth of back up funds. That would vary depending upon where you lived, but it seems more realistic in times when jobs are more easily lost.
Yes, I’d have more of my debt paid off it I put some of that money towards it, but my anxiety levels would be so high, it’s not worth it to me. I’d rather know that I could keep a roof over my family’s heads if something bad were to happen.

I am not one of the most experienced here, but this is my take

I would work on baby step 2 and 4 at the same time. Given that you don’t have a lot of years until retirement, I would not keep putting it off. But, you do not want to enter retirement with any debt. Aim to have the student loans paid off by then.
Another question, does the rental property pay for itself? Do you have equity in it? Would it make sense to sell it to pay off some other things or does it make better sense to hold onto it to help with income?
Can you increase your self-employment income in any way to help pay things off quicker?
As much as you’d like to help you kids with college, that cannot be your first priority at this point. It’s more important for you to enter retirement without debt and with something to live off of. I’d say that is even more important given how uncertain our economic times are.

Baby step help

Wondering if you can take a look and help me out. I’ve done Baby Steps out of order, for various reasons emphasis had to put on building up savings, etc.

Baby Step 1 – DONE

Baby Step 2 – paid off all credit card and auto loans. Still have
Student Loan #1 $18,787.24 @ 3.25% = $126.95/mo
Student Loan #2 $22,863.94 @ 3.25% = $151.63/mo
DH’s alimony = $816/mo until 9/1/18 – can’t really pay this off EARLY, so it will just be here until then from what I gather… unless we offer some kind of settlement, etc, at some point.

Baby Step 3 – DONE

Baby Step 4 – We are only contributing 5% of dh’s income to 401K because employer does full match on that. Nothing on my income from my PT job or my self-employment income. I am very worried because dh is 61 and time is not on our side.

Baby Step 5 – haven’t started, and I have six kids. Am hoping to be able to at least pay for their books.

Baby Step 6 – have main residence mortgage, rental property mortgage, and a huge no interest loan from dh’s former life… he had to “short sale” his house, but signed a 0% interest note on the remaining $65k balance (is now approx. $57k)

Baby Step 7 – I wish.

When I sit and look… it helps that the EF is done… but I still feel conflicted between BS2, BS4, and building up some sinking funds for auto replacement and household maintenance that need to be higher.

What would you do in my position?

People making those decisions

(employers, apartment managers, mortgage lenders) have gotten lazy. All they do is look at a number on the screen. If it’s high enough, you win. If it isn’t, you lose. No effort to actually understand the *person*, or their situation. So I guess we just have to become wealthy enough that these ‘losses’ won’t matter…

I wouldn’t have the PATIENCE to care for

someone *else’s* kids, and I know this. And I still say that not everyone is cut out for self-employment. Some of us don’t seem to be any GOOD at it. I’ve failed several times at self-employment(photography, sales, MLM, computer repair/consulting, etc.). I’m thinking that maybe I should just resolve myself to ‘punching a clock’ for the rest of my life…

Yeah, the care.com job is/could be good

but sometimes the end result is not worth the hassle. My kid did the whole sign up, fingerprint, back check…got a few chances with people that couldn’t make up their minds right away–guess hoping she would get desperate and take a rate drop.

She has private nanny gigs now–friends of friends or parent of the preschool she works at. She also has a second job that the parents work around because they know who she is and what she provides. Let’s just say, she is in high demand.

Her younger sister does pet sitting/house sitting. Rover.com does list people in our area. She could charge 3x and still be under what they charge. Also the time spent with the animals is less than what she does. Darn, would love to hear what her Christmas bonus was for the cat she watched for 10 days this fall…heard it was a good one.

I have been concerned about the same issue

– potential employers checking credit and mistakenly assuming a person who has a low credit score is therefore a high risk, when it could be precisely the opposite. There really should be a distinction between a score that is low because the person is truly a poor financial manager (i.e., late pays, charge-offs, etc) vs a person whose score is low due to inactivity. Definitely a significant difference.

Ah, there’s the problem

With the economy the way it is now, there are tons of people out of work. So if I were an HR person I might have 200 applicants for a job I post. Instead of taking the time to contact a person who has bad credit to ascertain the reason, it’s much easier to pitch it and move on to the next one. It’s an employer’s market right now in many areas. Now if it was a field or a position that has very FEW candidates, they might actually take the extra time, because they would need to look at EVERYONE who was qualified.

If they have the temperament for it

most would be better off working in customer service at one of the thousands of call centers all across the US. These call centers are ALWAYS hiring. In fact they giving hiring bonuses to anyone who currently works for them and they recommend the person. I know here in OK someone with no experience starts at Directv, Dishnetwork, Sprint PCS, and numerous other places at a minimum of $12.50 an hour and are trained for 6 weeks, while being paid the whole time. These jobs also have benefits, often starting the day you walk in the door.
If they happen to be fluently bilingual the minimum pay is even higher.
The places are also 24/7 in their working schedules, so that helps many with childcare and some even have in house childcare for a very low price.
Plus you sit at a computer rather than stand all day in greasy air—far better for your feet and complexion.
By temperament, I mean how well they deal with cranky customers. These are all inbound calls I am talking about, no outbound.

Oh, I don’t think for a minute

that the companies would just decide one day to admit it …. they would just keep doing it till they were caught and had to fess up. Yes, however it came out, there would be an uproar.
We are a small mom and pop company. We just get a pad of apps from the local office supply place and I never remember seeing a place to give permission for credit checks. Will have to look when I go in later … my curiosity is peaked now. Open-mouthed smile

I have been to several interviews over the past 5 years

and I think all of the applications asked for permission to access a credit score. I suppose you could cross out that line on the application, but if they do use credit scores, you probably won’t get the job. On one interview, the application was computerized and there was no way to go to the next screen without granting permission. I’ve seen a couple of job ads that pretty much said not to apply if your credit score was poor, and I’ve even seen one that said not to apply if you weren’t currently working.
I’ve heard the reasoning that those with poor credit scores are more likely to steal, and some people will figure out a way to steal. However, I think good accounting controls can prevent some of it.
I worked for a company where the person who ordered office supplies allegedly ordered extra things and charged them to a random department’s account. An alert manager realized her department had been charged for things they didn’t receive, and that’s how this person was caught. After that, each manager had to approve the supply order for his department before it was placed.
Another instance of alleged employee theft likely could have been prevented, but the manager allowed one person to have access to just about all of the accounting systems and didn’t separate job duties properly. The employee likely wouldn’t have been able to cover up the theft for so long had checks and balances been in place. And somehow nobody noticed that office didn’t seem to be making as much profit as it should have. I’ll bet the person who was suspected of doing all this had a good credit score since the stolen money was being used to pay credit card bills.

I’m starting to understand why workers at fast food joints are demanding higher pay

It’s bottom-of-the-totem-pole jobs like that which are where folks end up, when they absolutely positively need income, and can’t get hired anywhere else. I know we’ve already talked about that issue here and I don’t want to start another argument. But I think the days of those jobs being held by only the young, and/or those who just need a part-time job for some extra spending cash are long past, now they use payday loans in FL lenders. Most of the fast food joints I’ve gone into in the last few years (and it’s a lot less than it used to be, but it used to be almost every day), 1/2 of the staff were easily more than 30 years old, and they were there every day. This might be one of the reasons why. Or they’ve turned into house cleaners or yard mowers or bottom-rung construction workers or pizza delivery folks or whatever. I used to think that when I worked minimum wage while making a mortgage payment, I was unique. We know now that’s becoming more and more common. Sounds like a viscious circle to me. Can’t get higher paying jobs, and can’t get anywhere with the bottom-rung jobs they have.

Hard copy apps have a place for your SSN

We don’t run credit checks on potential nor actual hires. We use it only for hiring purposes to add them to payroll. What I wonder is how many credit checks are run without getting permission? There is no place on the apps we use to give such permission, though we could type up a letter for that purposes for them to sign if we decided to do it.

Great, it’s spreading like a virus..

🙁 When I was unemployed, I think that only one or two of the applications required permission for such a search. But the problem is, not everyone can BE self-employed.
So if you don’t apply for jobs because they require good FICO scores, then what’s left? And what about those whose scores have tanked *because* they were unemployed(or underemployed). It’s kinda hard to pay off debt when you can’t get a job because you have too much debt.
We need a revolution…

One of the issues with how online applications are set up

is that you cannot complete the application without giving that information (and thus that implied permission). They won’t let you progress to the next page without that “required information”. It’s a slick setup – you don’t want to cooperate, you don’t get to finish. I used to only see that once in awhile but this latest job search in Sept featured that on every single web-based application I filled out. And ALL of the job postings required that I fill out their online form. No paper versions allowed. A few sites were so blatant as to say that paper resumes and applications would be dismissed without being read.
Nothing like being herded into the cattle car. That’s about how it felt. So I am not surprised in the least that they would then use that SSN information to run the credit report. Which is why I stayed in the “self employed” category, despite earnest intentions to get back into Corporate America (or even non-profit America for that matter). They don’t want to be cooperative, then I sure as heck don’t want to work there.

I’ve heard hiring, insurance, apartment rental..

But the whole idea is stupid. You could have two million dollars in the bank, but no credit score because you refuse to borrow money. So an apartment building that uses FICO score to screen tenants might not rent to you, even if you could buy the whole damn BUILDING…

Yes, I understand it’s not for job loss

However we have had plenty of people post here of Murphy hits that came one after the other in a short time. You know that old saying (and truth to many) that trouble comes in three’s. Individually a $500 hit can easily be covered by $1000 but 3-4 of those hits in a couple of months or less is difficult to cover with $1000.

I would say though that about $2000 – $2500 for most people would be sufficient.

Oh, and they don’t need your permission

Your insurance companies, your current creditors (banks, credit card companies, etc) can and do run periodic checks on customer credit scores. Credit reports are required to list who has run a report within the last 3 months whenever a report is issued, but no they don’t need permission.

If you follow the steps, you would use all your emergency fund except for a thousand dollars

Then cut your expenses to the bear bones. Raise deductibles, drop cable, walk/bike places instead of drive, cancel hobbies, cut cell phones, cut your own hair, slash the food budget, turn down the heat, shop thrift stores.
Get gazelle and find $1000 a month to throw at those student loans.
Get the kids involved. Get them to sacrifice things and make money too.
Find ways to make extra money too.
You can do it! Pay those loans off ASAP.
it’s not forever, just buckle down and get it down quick.
Then you can focus on getting your retirement percentage to 15%.
Your kids may have to get jobs, grants, and scholarships. Do what you can, but make your retirement savings the priority.

Many of you will remember that I have completed several fairly intensive job search campaigns

since being laid off New Year’s Day, 2011, and since joining the DR list. To date, I sent out about 50 resumes sent out. These resumes were very well matched, I had years of work experience in that particular position, and in a lot of cases I was either asking for, or would have asked for, less than the going rate (as researched for each position). In all that time, got two callbacks for interviews, and those didn’t end up anywhere. I have often wondered if it was a) that I never use Facebook, so they can’t see who I “am”, and/or b) that I had a low credit score after stopping the use of my credit cards. Of course I can’t prove anything. But just statistically speaking, I should have gotten a lot more response than I did. It wouldn’t surprise me at all to learn that companies were using this to rank applicants.

I listen to KLBJ out of Austin

Texas most nights and early this morning I heard a discussion about a news report similar to the one below about how many possible employers are turning down very good applicants because of their credit history. There are various state and now federal bills being discussed to make this practice illegal. Certain federal laws already exist against this practice, but people are being bullied into giving permission to have one ran.
The discussion I listened to talked about how this helped employers to not hire people who might be strapped for cash and be “tempted” to tip their hand in the till.
Others said they used the credit reports to see what type of work ethic and money management skills they had that if the person didn’t have a good credit report they would be considered a poor risk.
Not one single call in mentioned that you can also have a low credit number because you have VERY GOOD money management skills because you pay cash for everything. The entire talk radio program pissed me off. Of course I couldn’t get through on the call in line.
Having a high credit score shows only you borrow money from Peter to pay Paul and are paying stupid tax along the way. Thus making you more of a financial risk than someone who has true good money management skills.
It was also discussed how insurance companies use the same set of rules when calculating your insurance. Both are wrong! Using credit does not show your worth, it shows (as we all know) poor money management skills.