This month I’ve decided to say thanks to the people who have fed my hunger for knowledge and personal development this year. The order will be random…and likely incomplete!

I’m having a bit of Dave Ramsey overload this weekend. On Friday, I hosted and attended his EntreLeadership simulcast event from Orlando, FL. Today, I spent two hours presenting an overview of his material and why it’s important to get control of your money.

Meeting with Dave in Birmingham, 2006

I owe Dave Ramsey a huge debt of gratitude. Better than the financial kind, eh?

But what Dave gave me is more than just solid financial guidance. True, my finances are in much better shape because of his well-packaged common sense advice. That’s not the most important thing he gave me.

I’ve led his Financial Peace University program 13 times in the last four years. I love doing it. FPU helped me tap into my passion for teaching and helping people. FPU gave me an audience to go along with material I believe in.

I’m energized when I teach. I love seeing people get it…those light bulb moments! Beyond that, I love seeing people change their lives. I’ve had people become debt free, pay off their mortgages, and even get their first $1000 in the bank. Don’t scoff at that…Baby Step 1 can be harder than the others!

FPU also introduced me to many other people that have had an impact on my life (and will be featured in more Thank You posts soon).

Our lives are full of pivotal moments. Most of the time we don’t recognize their significance. I know now that when my father mentioned a crazy radio guy to me in 2005, everything changed. Everything!

Thanks, Dave!

If you haven’t checked him out yet, you owe it to yourself to do so. Maybe everything will change for you too!

Do I dare open it?

Why sure. It’s only my annual Social Security Statement. At least it’s not from the IRS (really scary stuff from that brood of demons).

So how is something from the Social Security Administration scary? Keep reading…but you may want to sit down.

I’m 35 years old. Looking at the statement, it summarizes my income since I started earning money and filing a tax return (a whopping $713 dollars in 1991!). I’ve been blessed since those intermittent high school summer jobs to earn a great living doing work I enjoy, so the numbers for 2008 (the last year on the statement) are much, much higher. A real pat yourself on the back and thank God moment.

Below that section is the scary part. Scary mad that is. The statement summarizes the estimated taxes paid into Social Security over my working career. My portion is more than $50,000! My employer’s portion is the same (and I’ve always considered that a portion of my income I just don’t get to handle, since it would be mine if the government didn’t force it from my employers hands). All told, more than $100,000 dollars paid into Social Security so far.

It sure would be nice to have that money in my Roth IRA instead of being pilfered by the government. You see, if I could have that money today, and invest it at 12%, in just 20 years, it would be worth more than $1 Million Dollars! I’d be a 55 year old millionaire, and never have to invest another penny beyond today!

But there’s a problem. Even if the old SSA could give me a return like that, at 55 years old, I wouldn’t be eligible to get my money. In fact, if I die before I’m eligible to start collecting Social Security, my family doesn’t get to keep the money. The government does! If it were in my Roth IRA or 401K–or even my sock drawer–my family gets the money. Did you digest that? Read it again!

Scared now? Or just angry?

It gets worse…

Considering the horrible state of affairs with the old Social Security funds, I likely won’t be eligible to collect until I’m about 75 years old. Again, if I could have the money in lump sum today and invest it myself, earning 12%, I’d have more than $11 MILLION DOLLARS!!!

BOO!

More like BOO-HOO!

Source: http://commons.wikimedia.org/wiki/File:Jack-o%27-Lantern_2003-10-31.jpg

I cannot trust that Social Security will even exist when I’m able to retire. And unless you’re already collecting, you probably can’t trust on it either. You have to make your own retirement happen.

Get out of debt, build an emergency fund of 3-6 month of expenses, and then invest 15% for retirement.

Only you can make yourself a millionaire in your retirement years. But you have to start soon. Time and compounding interest are your best friend or worse enemy, depending on when you start.

How much do I wish I could opt out of Social Security? I’d be willing to forfeit the $100,000 I’ve already paid in, if I simply didn’t have to pay another dime into the program. Then I could invest my 6.2%, plus my employer’s 6.2%…and build my own wealth.

Remember this next Halloween. It’ll only be a few days before Election Day!

The simple fact is that some people are beyond help.

It’s not that their situations are beyond repair. I’ve seen some pretty bad situations while coaching, but there are paths forward for all of them. The problem is that some people simply want a magic pill to solve all of their problems. They have blinded themselves to the reality of their situations and don’t want help…or won’t admit they need it.

So, if you simply need a friend to pat you on the back and let you wallow in the pit you’re in, I’m not the coach for you. But if you’re sick of where you’re at…if you hate your job or aren’t reaching your financial goals…let’s talk. If you’re ready to make changes and work hard, let me know.

I can help you.

Click Here to Listen to the Call with Max Dempsey

Several years ago Max made some bad financial decisions and put his family in a horrible money mess. But by seeking help to make better decisions and change bad habits, he’s climbing out of a deep hole and has a new outlook on his finances. Listen as I talk with him about his story, and how you can learn from his mistakes and the Financial Peace principles he learned.

As I mention at the end of the call, my next Financial Peace University class is starting on Sept 27th at 4 PM. Below you’ll find some details about the class. But what I failed to mention is that I’m inviting everyone to come to the first class for free! Just show up, and if you want to join for the duration you’ll be able to purchase an FPU kit that night.

Summary info about Dave Ramsey’s Financial Peace University.

Click here to register for the class.

For more info on this class, download our brochure or contact me directly.

YOU are the biggest factor in your financial life. And if YOU are in a mess, YOU need to clean up your act. But you don’t have to do it alone.

Dave Ramsey’s Financial Peace University is just as relevant now as it’s ever been, and perhaps more depending on your financial/job situation.

Take this course and you’ll gain financial knowledge with the motivation and inspiration to develop new habits that will radically alter your future. It’s simple stuff really…but sometimes the simplest things are the hardest to actually do.

My next FPU class will start in just a few short weeks. Will you be there?

Click here to register for the class.

For more info on this class, download our brochure or contact me directly.

SPECIAL ANNOUNCEMENT: In the next day or so I’ll be posting an interview I’m conducting with a friend who was in a dire financial situation. We sat down several times and worked through the FPU principles…and the results have been incredible. You won’t want to miss it! Stay tuned!

It was a lot of fun being a guest writer for Jennifer’s blog and I hope the article is an encouragement to many. Be sure to comment or ask a question on her blog in order to win a prize! Of course, I’ll take your comments and questions here as well…

Do you have a question for James?  The simply click here to send a question!

———————————

Danny,

There are several distinct issues in your question, Danny, so let me address each one individually.

1) Relationships and Debating
I hope you’re just having a fun kind of debate with your brother, and not the kind of debate that ends with both of you feeling badly toward each other.  Remember that no matter how logical your position, neither of you is likely to concede within the context of the current discussion.  People do not change their minds.  Ever!  But they will make different decisions based on new information.  That information may simply take some time and experience to settle into the old grey matter.

2) Is life gambling?

I think the common thread he’s using to tie life, gambling and the stock market together is the word risk.  Yes, all three have a degree of risk.  But the real question is how to respond to the risks.  Life without risks is not life at all.  Investing and gambling are both risky, but in varying degrees that we need to explore further.

3) Is investing in the stock market the same as gambling?
First we need to define some parameters for our discussion:

• Let’s limit the stock market to mean the buying and selling of shares of stock in individual companies (not including mutual funds).
• Let’s define gambling as placing money in the form of a bet on a random set of circumstances occurring.  Guess the outcome and win.  Miss the outcome and lose.

We have to evaluate both investing in the stock market and gambling in terms of risk (opportunity for gain or loss), reward (potential return) and skill (ability to influence the outcome).

Risk:
Gambling is obviously high on the risk factor, with varying odds depending on the game being played.  The big lotteries like Powerball have a very low chance at winning with odds of more the 1,000,000 to 1 against you (likely much worse).  Casino games like blackjack, poker and even slots have much better odds, though there are no games where the house does not have the advantage (warning sign, right?).  Win the bet and you get paid.  Lose and you get nothing.

The stock market also has risk.  When you buy a share of stock, you get a small piece of ownership in the company.  The value of a share of a company’s stock goes up or down almost every day, based on what the public believes the overall value of the company is.  Buy low and sell high is the mantra to make money in the stock market.

Because you have the share of stock, you are getting something for your money rather than just a random chance (the lottery ticket or betting track stub don’t count).  That share is worth something, even if it is worth less than it was when you bought it.  It can eventually become worthless if the company bankrupts, so there is no guarantee of future value.

So from a risk perspective, the stock market wins over gambling, but it’s still too risky to put all of your money into one company (Enron, anyone?).

Reward:
Again there is a spectrum to the rewards available from gambling.  Buy a lottery ticket for a dollar, and you could win millions.  Great return!  However, the odds are very much against you because the old adage that you are more likely to be struck by lightning is true!

The rewards are smaller when it comes to the casinos, where penny slots may be the least risky but offer the smallest rewards.  Poker or blackjack may be better odds than the lottery, but aren’t likely to make you rich (and again, the odds are always against you).

In the stock market, there’s the potential that you buy a stock just before they announce the cure for cancer or something that will see its value skyrocket overnight (anyone own Apple before the iPod came out?).

Timing is important, because it’s all theoretical until you buy or sell.  Losses and gains are not realized until a transaction takes place.  I had a friend who had more than a million dollars worth of stock options with MCI Worldcom.  They hadn’t matured so he couldn’t sell them, and then the company went bust.  Was he ever really a millionaire?

Most of the time, individual stocks will go up or down at a somewhat slow pace.  The reward is not likely to be quick, and if the gains are high, brace for the losses to be just as dramatic and unexpected.

Again, give the stock market the nod on the reward side of the equation.  You aren’t likely to get rich quick, but your odds of gaining over time are much better.

Skill:
What is your ability to influence the outcome when gambling?  Lottery?  None.  Casino?  Depending on the game, you can learn enough to avoid some losses, but very few of the games could be called games of skill vs. games of chance.  Remember that the house always has the advantage (which is why their house is bigger than yours!).

If there is no skill involved other than knowledge of the odds for or against you, and you cannot affect the outcome, stay away.

What is your ability to influence the value of a company’s stock?  Very little if any at all.  If you work there, you can have an impact over time.  If you make a video about how they destroy guitars, you can bring the value down for a bit if enough people watch it.  But on the whole, between you between you and the insider trading laws, there isn’t much chance you’re going to affect the value of a stock in a significant way.

Even the ability to pick a good stock is in question when monkeys throwing darts can perform well against the experts!

Call skill a loss for both fronts.

What is Your Intent?
An added dimension is the spirit of the transaction.  “He who hastens to be rich will surely not go unpunished.”  –Proverbs 28:20. Translation: don’t go for get rich quick or you will get burned.

It either doesn’t work and takes you down, or it does work and destroys your life.  There are countless stories of overnight lottery millionaires who are broke and/or dead within years of winning.

Are there risks in life?  You bet!

But is life a gamble?  Not if you have a God who loves you!  He owns the house, and the house always wins!  Be a member of the family.

———————-

Risk/Reward Spectrum
Here’s how I see the spectrum of investing risk/reward, with a mind toward retirement:

• Do nothing – High risk, no reward.
  You need to do something to advance your future or you will have the future someone else plans for you.

  Life Analogy: Stop breathing.

• Stuff cash in jar/mattress – Low risk, no reward.
  With inflation considered, you’re actually losing money over the long term.

  Life Analogy: Couch potato.

• CD’s/Savings Accounts – Low risk, low reward.
  Few accounts keep up with inflation, but it can be a safe place to put money in the short term for specific purposes.  Your retirement should not live here though.

  Life Analogy: Breathing, but little life to speak of.

• Money Market Accounts – Low risk, low reward.
  Better rates than CD’s or Savings Accounts, but not good enough.  Okay for the emergency fund, but it is not an investment.

  Life Analogy: Signs of life emerging.

• Mutual Funds – Low risk, moderate to high reward.
  Investing in good, steady mutual funds may not be as fun or sexy as rolling into a casino, but you aren’t likely to lose your shirt either.  The markets over the long term gain 11-12%, so this is a great place for your retirement to both grow and beat inflation.  (Still, it should still be spread around…don’t put everything in one account.)

  Life Analogy: Wisdom abounds…life is good.

• Stocks/Bonds – Moderate risk, moderate to high reward.
  If you pick the right stocks and time things right, you can make money.  But do you really have the time or knowledge to bother with it?  Stick with mutual funds.

  Life Analogy: Living on the edge…

• Lottery – Extremely low risk, extremely high reward.
• Lotteries are a voluntary tax on the poor and stupid.  If you want to blow a dollar every once and a while (and you’re feeding your kids!), it probably won’t break you.  But you’re playing the get rich quick game…and it’ll bite you eventually.

  Life Analogy: Hoping for a miracle that God rarely grants…but the other guy might.

• Casinos – Gambling my hard earned money away just isn’t my thing.  If you like losing money and can afford it, that’s another problem altogether.  Just don’t expect to win.  You won’t see me at the tables or slots anytime.

  Life Analogy: Running into traffic…life is a rush if you survive.

Next month I’ll be writing a special article for a friend’s blog. Jennifer Bartlett has invited me to be a special guest writer on her blog, A Pair of Bartletts.

Over the last few weeks, every Tuesday she’s had guests of all sorts writing on topics close to their hearts, be it writing, family, special needs children or adoption (many of which are close to my heart as well!). So I’ve chosen a top secret topic, known to only myself, my wife and Jennifer (and perhaps Rob, her husband). Want to know what it is?

Hint: It involves family finances and a four letter acronym…oh no! I may have given to much info there…stay tuned to find out more.

PS – There will be a prize giveaway for comments on her blog!

It seems that someone somewhere did a research study to find out that married couples have a tendency to be opposites when it comes to their spending habits. That means someone actually took the time and money to come to a conclusion we already know!

Seriously, money issues are the number one reason for divorce in the United States (and likely around the world). Some people are savers while others are spenders. Dave Ramsey divides people into nerds and free-spirits.

However you want to divide people into categories, the fact is that when you get married you have effectively entered into a three-legged race with your spouse. Work together and you can be fast. Work against each other and you’re going down!

So how do you get together on your money without having a big fight?

First, you both have to be adults about it. Realize that you are in it together and that you probably have more common ground than it feels like. Lay out your short term and long term financial goals. As the old G.I. Joe cartoon stated, “knowing is half the battle!”

Once you know your goals, you have to track and evaluate your spending habits. Having a budget or spending plan is essential. But even if you can’t get that far, you can start asking one simply little question and it will set you free: “Is this the wise thing to do?” (I totally stole that from sermon series by Andy Stanley, but I don’t think he’ll mind.)

• Is it wise to buy a new car when we don’t have an emergency fund (or the cash to pay for the car!)?
• Is it wise to send the kids to a private school that costs as much as college tuition, when we have perfectly good public schools in our area?
• Is it wise to eat out as much as we do?
• Is it wise to invest for our retirement when we have loads of credit card debt?
• Is it wise to spend our emergency fund on a vacation to Hawaii?
• Is it wise to buy a house with no money down?

You can see that even under these questions, some conflict may still exist. One more rule will get you through: If you can’t agree with it and have peace, don’t do it.

There can be no “I told you so” statements later on. You’re either both in or you don’t do it.

After all, the preacher (and the Bible) state that once you get married, “now you are one”.

Act like it!

Full disclosure here: Even my lovely wife and I don’t agree on everything! Gasp! I’m a huge nerd (king of the nerds in fact) and she’s a free-spirit (channeling Woodstock or something). It takes a lot of work and a lot of time, but it can be done.