A Personal Finance Guide

Ted and Wilma are in their thirties and both work outside the home. Ted is paid weekly and Wilma is paid once a month on the 20th. Their take home pay is enough to pay the bills with very little left over.

In this family, Ted is the “Clyde,” the Clyde who runs the water out of the tub while you are trying to fill it up. Clyde is usually the one who does not actually sit down and write the checks to pay the bills. Clyde is the one who talks a lot about being the boss, about how smart and tough he is, but Clyde is really a baby. He understands nothing about the family finances, but gripes when he cannot buy what he wants or if he happens to see a cutoff notice on the electricity in the mail. Clyde is usually the male, but in rare cases, Clyde is the female. Anybody have a Clyde like this in your life? And sometimes there are two Clydes! “Lawd” help!

Wilma reads “The Debt Destruction Engine”, which is weird to her because she sees herself mentioned on page 100. Then, Wilma wins Ted, her “Clyde,” over to her way of thinking, well, at least somewhat. He does not completely understand or like what she is doing, but agrees to at least try to go along with it. Ted’s take home pay for the month is 56% of the family’s total take home pay. He is paid on every Friday. So, each check, in most months, is 14% (56% divided by 4) of the monthly take home pay. Wilma is paid once a month and her check is 44% of the total take home pay.

Wilma knows that they tend to spend whatever is available to them and then try to pay the bills with what is left. She decides to “get the money out of their hands” so they cannot spend it before they pay their bills. On Thursday night each week before Ted gets his check on Friday, Wilma writes checks for 14% of the monthly bills. On the evening of the 19th before she gets her monthly check on the 2oth, she writes checks for 44% of the bills. This way the money is gone and they cannot blow it and have to live on what is left. Notice that they are not, thus far, running a debt destruction engine. They have to do what is described here just to keep from falling behind.

They will need to develop the habit of covering their everyday expenses mostly with the remainder of Ted’s weekly check. The remainder of Wilma’s check will be used mostly for things like the monthly excursions to camp out at the lake, for Christmas layaways (to acquire Christmas gifts gradually throughout the year to avoid credit), minor maintenance on the cars, weekend trips, and their “drug” habits. (These are the things they have always habitually “drug” themselves out of bed for on Saturday morning like fishing and flea market hopping.)

Wilma figures out which bills need to be paid at each check-writing session and makes up a schedule for bill paying. She makes copies of this schedule to put in her master bill-paying file. As each bill comes in each month, she writes the amount due on her schedule beside the name of the bill. She then puts the bill and its payment envelope in the file for that bill. She has a file folder for each bill. Every Thursday night and every 19th of the month she pays bills in the ratio that was described earlier.

“Isn’t it inefficient time-wise to write checks 5 times a month when you could just let the money accumulate and write checks once or twice a month?” It is inefficient time-wise, but you do whatever you have to do to win! Most of us simply do not have the discipline to refrain from spending everything we can get our hands on and need to get the money out of our hands so we will not blow it. Some people may need to write the checks multiple times a month at the beginning until they can develop the necessary discipline and then they can let the money accumulate and pay bills once or twice a month.

Her bill paying is proportional now to the way the take home money comes in, which keeps her and Ted, for the moment, from falling behind. She realizes that even just paying bills on time is at jeopardy because of the certainty that things will go wrong that will require extra money. If she wants to be able to pay for the things that go wrong without using credit, she has to find extra money. She also realizes that she and Ted could operate an extra fuel version of the debt destruction engine if they could find even just a tiny bit of extra fuel to burn in their debt-destroying locomotive.

She wants to change their income tax withholding so that they no longer receive the $2,100 refund they usually get every year. Ted does not like this, but goes along with it. She changes the withholding so that the taxes are paid, but there is no excess just sitting there not earning any return. This increases their spendable cash $175 a month. They are in effect “giving themselves a raise” and taking their refund throughout the year.

She reads “The Wealthy Barber” by Chilton all the way through and then goes back and reads Chapter 5 again to understand how to make the appropriate decisions on life insurance. She sits down and looks at their whole financial situation to try to identify the weenie tax in their lives. The weenie tax is the total of all the survival crutches, those unnecessary survival aids that we “rent” each month or each year that actually transfer our wealth away to the “providers” of these crutches.

If we decide that it is just too much trouble to try to understand this and too much hassle to cut out these crutches, then we are being weenies. This is called the weenie tax because we are rendering a tax against ourselves for being a weenie. These survival crutches which make up the total weenie tax are discussed in my debt destruction books which I give away free and in other articles.

As Wilma seeks out survival crutches, she pays special attention to the discussion of “generally speaking” in pages 44 through 54 of “The Debt Destruction Engine”. She writes down these crutches that make up their weenie tax on several sheets of paper. She goes to see a friend of hers who is a personal financial planning nut, not a CFP, just a guy who is interested in this kind of thing to get his opinion. She visits her uncle who is a CFP, Certified Financial Planner, to get his opinions.

She carefully takes notes everywhere she goes. She sees her father who is an insurance agent to get his opinion. She consults with 4 other people who are wise in such matters. After 2 weeks of praying about this and consulting with knowledgeable folk, she sits down with Ted and explains that she has identified several “crutches” that should be eliminated. (Explaining all of this to Ted is probably the hardest part of it all.) He does not really get it too well, but agrees to go along.

Wilma and Ted carefully review Chapter 5 of “The Wealthy Barber” yet again to understand the type and amount of life insurance they should carry. They get a term life insurance policy on each of them in the appropriate amount that is renewable and convertible and are surprised that the amount of the death benefit is so much higher than the death benefit amounts on the whole life policies they already have. They are even more surprised at how much lower the premiums are.

(When you talk about whole life, the death benefits typically run in amounts like $20,000 and $40,000 and might go up to $100,000, but rarely go higher. Term life death benefits typically run in amounts like $100,000; $150,000; $200,000; $250,000; $325.000; $375,000; $500.000 and might go up to $1,000,000 and can go even higher. For youngsters in their thirties like Wilma and Ted in good health, the premium on each policy, for the death benefit amounts that are best for them, will run anywhere from $13 to perhaps $30 depending on the company and the actuarial factors that exist. These premiums are much lower than premiums paid for much lower whole life and universal life death benefits. The folks who have never really looked at term life before are usually very greatly surprised at the difference.)

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