According to a Columbia study Americans are pretty clueless about energy usage. 

Take this quiz to see how energy smart you are.

Many people believe that they can save energy with small behavior changes.  When in fact these small changes, such as switching off lights, actually achieve very little.  In addition most people underestimated the benefits  of switching to more efficient appliances and autos.

The study surveyed people regarding their understanding  of the most effective ways to save energy. The survey results appeared in the Proceedings of the National Academy of Sciences.

Nearly 20 percent of the people said that turning off lights is the best approach to saving energy.  The truth is that turning off lights affects energy budgets relatively little.

If you can afford make changes the highest energy savings will come from replacing energy wasting autos and appliances with a more efficient ones.  Plus, weatherizing your home.

Saving energy = saving money!

Personal finance coach, Matt Kelly, lives in Durango, CO.  He blogs here at www.debtfreetribe.com and writes a monthly newspaper column called Money Savvy.

Kids’ Money is a website with financial education resources for parents, teachers and kids.  It has been awarded a Parenting Journals Editors Choice Award.

This site has a good variety of resources to help teach kids about money.

Money Talk Night is an event sponsored by American Express promoting teaching children and young adults about personal finance. I’m not a fan of their credit cards and debt, but I like teaching kids about personal finance.

The host of Money Talk Night is Jean Chatzky.  Chatzky is an award-winning journalist and financial expert. She’s a New York Times best-selling author, financial editor for NBC’s Today, contributing editor for More magazine, and a columnist for the New York Daily News.

Visit JeanChatzky.com to get more of her tips on how to lower debt and find financial security.

My 9 year-old son works on commission; work and he gets paid.  No work = no pay.

We’ve had this system in place since Cheri and I got our personal finances in order.  We started with age-appropriate jobs and pay and have gradually increased the difficulty of the work and the amount of the pay.

He loves the system and is learning.  Some of the lessons he has learned are:

1. It feels great to save for a purchase.
2. Giving to charity is as much fun and spending.
3. Think before you spend because junk does not last.

His first big purchase was a stuffed turtle – he carried it around for 3 days telling everyone how he’d saved up $27 to buy it. And his first charitable donation was to Durango, CO’s new Boys & Girls Club – he was so happy to donate $19. And they were thrilled to have a young donor.

Our system came from Dave Ramsy’s Financial Peace Jr. for Kids.  The way we use the system is

1. We decided on age-appropriate jobs.
2. We agreed on how much would be paid.
3. When work is completed it’s checked off on a dry erase board.
4. At the end of the week the pay due is added up.
5. Any fines for poor behavior are subtracted from his pay.
6. He’s paid and 1/3 goes into each of 3 envelopes; Save, Give and Spend.

It’s a simple system that teaches powerful lessons.  Buy one or build your own with a piece of paper for tracing work, pay and fines; plus 3 envelopes for holding money.

Today I’m going to review the United First Financial The Money Merge Account® Program; also know as a MMA for Money Merge Account.

They say, “Eliminate Your Mortgage.
The Money Merge Account program pays off mortgages faster using an interest-cancellation strategy. While many homeowners realize that they can save money by reducing the interest rate they pay on their loans, few think about the length of time they will be paying. The Money Merge Account program combines innovative software with traditional banking systems and personal coaching to drastically reduce your mortgage term and minimize your interest.”

So far so good; I totally agree with paying off all debt.

So how does the MMA system work?

First buy their system for $3,500.

Then they say the user will

1. Need a deposit account; usually a  checking or a saving account.
2. What they call a Facilitating Account which is a savings account or a Line of Credit.
3. Need their software to tell them when to transfer money between accounts.

What I’m not liking here is the idea of using debt to pay off debt. Not to mention that banks aren’t really excited about Home Equity Lines of Credit at this time.

What I’m seeing is that if you were spending less than you make the software might have you fill the facilitating account with surplus money and then pay off debt with that money.

Or as I saw with friends who bought this program, for $3,500, the software told them to pay off a higher interest rate truck loan with their Line of Credit and then there was nothing they could do until the paid down the Line of Credit.  All that advice for $3,500?

One of the reasons they say you can’t do this yourself is that it’s too complicated and requires very sophisticated software.

I just don’t agree – you could do this with a pencil, paper and calculator and some basic personal finance principles.

My opinion is save the $3,500 and do it yourself.

Here are the steps I teach in my personal finance class:

1. Save a $1000 Emergency Fund
2. Establish a budget
3. Start using the cash envelope system
4. Begin paying off your non-mortgage debt from smallest balance to largest
5. Consider selling anything that will take longer than 18 months to pay off
6. When your done paying off your non-mortgage debt, grow your emergency fund to equal 3 – 6 months of living expenses
7. Begin saving for financial independence
8. Begin saving for college, if you have kids or someone you want to send to college
9. Begin saving a $20,000 major medical fund
10. Begin paying off your home aggressively

I tend to put paying off your home last in the the process, but that is because I value peace of mind over not having a mortgage.

Don’t get me wrong – I want that mortgage done ASAP too.  I just don’t happen to believe in magical software and borrowing to pay off debt.

I ran into a friend of mine this morning and as we stood talking on the sidewalk I noticed that he had a Porsche keyring in his hand.  While we’d been talking I’d been admiring the Porsche Boxster parked right in front of us.

I asked him if it was his – knowing that he’d been wanting a Porsche for some time.  He’s retired and can well afford one.

What surprised me was that he said, “Matt, I did just what you said to do. I paid cash!” You need to understand that this is gentleman became financially independent with no help from me, but he loves my class Creating True Financial Independence and the concepts I teach.

He went on to tell me how he’d saved for three years for this car.  Three years ago he’d looked at a new one priced at $44,000.  The one I was looking at was a 5 year-old Boxster with just 16,000 miles.  He paid $26,000 for this one; instead of $47,600 for a new 2010 model.

He went on to add that he carries liability only insurance.

Here’s the three lessons from this story:

1. Financially independent people got that way by saving for their purchases.
2. Buying used cars is important.  Cars go down in value in the first few years of ownership.
3. Insure only what you can’t afford to replace.  This goes for electronics, cars and all other possessions.

Congratulations friend you deserve this Porsche!

Headlines abound, “The wasted 4.44% mortgage rate” or “Super-low mortgage rates haven’t stimulated home buying market” and nobody is talking about the elephant in the room. The Elephant is truth that mortgage interest rates are not the problem.

You don’t need a better mortgage rate; you need to spend less and if you have an income problem you need to earn more.

Yes, it’s nice to be able to get a low rate on a mortgage loan and rates have been low for years.  A quick look at historic mortgage interest rates over the last 10 years show the average to be about 6% with the high being about 8.5% and the low about 4.44%.

The problem with refinancing a mortgage is that you start all over again at 30 years, 15 if you opt for a little higher payment. Thus you keep moving your self back to start every time you refinance.  So who is getting ahead; you or the mortgage broker who makes a commission on your mortgage?

What should you do to get ahead?

1. Make a budget and live by it.
2. Cut up your credit cards and use cash for discretionary purchases.
3. Sell anything that has a loan that will take you more than 18 months to pay off – except for your house.
4. Consider selling your home if it is costing you more than 25 – 35% of your take-home pay.

Need some help jump starting the process?  Here are 10 ways to raise $300, plus there are an additional bonus 8 ways. Apply 1 way each month and for the next 18 months you’ll be on your way towards being debt-free.

This may sound extreme, but remember that if you get debt free and find that you don’t like it you can always go back into debt.

Take This Job and Shove It became more than a song when JetBlue Flight Attendant Steven Slater made his grand exit and became a working-class hero.

So why did he become a working-class hero to some people?  Because those people feel stuck in jobs that are less than satisfactory.

There are 3 steps be getting out of a job you hate.

1. Get out of debt by paying off all non-mortgage debt.  It will take you about 12 – 18 months if you are really motivated.  A great way to get the help you’ll need is to take a class like Creating True Financial Independence or Financial Peace University.

2. Establish an emergency fund equal to 3 to 6 months of living expenses.  This will give you the freedom to try something new without having to worry about short-term income.

3. Find your passion. The is a wonderful book called The Passion Test and there is an online Passion Test.

These 3 steps will change your life.  Are you willing to do whatever it takes to get what you want?

Starting August 15, 2010 banks will have to decline customers’ withdrawal requests at ATM’s and point-of-sale unless they give express permission to banks to let them overdraw their accounts for a fee. This change is a result of a change in the Federal Reserve’s Regulation E policy.

In Durango, CO this fee is running between $27 and $40

Bank of the San Juans – $27.00 fee

Bank of Colorado - $28.00 fee

First National Bank of Durango – $35.00 fee

Wells Fargo Bank – $35.00 fee

Alpine Bank – $40.00 fee

I understand that motivation of the banks; they want to make a profit.  They market this service as a privilege.  And it’s relatively risk-free for the banks.  Most overdrafts are small, on average about $17, and most customers make good on their bad checks while banks earn fees.

This new regulation is all about banks being able to allow your debit card and ATM transactions to overdraw your account; then they cover the transaction and charge you a fee for the “privilege”.

I recommend that you don’t opt-in for your bank’s overdraft “privilege” and instead you take control of your personal finances and stop paying unnecessary bank fees.

3 steps for avoiding overdraft fees are:

1. Create a budget and follow it.
2. Use cash for all discretionary purchases.
3. Balance your checkbook each month.

Today, I received this message from a friend and thought I’d answer it here.

Hey Matt,I thought I remembered that you had been doing something with Dave Ramsey… I was curious as to your thoughts on his program, etc.
L.

Dear L,

Yes, I helped pilot Financial Peace University at First National Bank of Durango. It’s the class that helped Cheri, my wife, and I pay off $165,000 in debt and save $20,000 in 15 months.

For us it was an amazing and transformational class. It offers sound advice on how to get out of debt.

Financial Peace University (FPU) is a 13 week class taught primarily though churches by volunteer class organizers. The cost of FPU is about $100.

Each class in 2 hours long an consists of watching a Dave Ramsey DVD and then small group discussion.

To review FPU I’ll offer Pro’s and Con’s and how my class Creating True Financial Independence differs.

FPU Pro’s:

• Material is easy to follow
• It’s works if you commit to change your behavior

FPU Con’s

• Dave Ramsey is an Evangelical Christian and he quotes Bible verses (may be a con depending on your views)
• 13 consecutive weeks is a big commitment
• Many of the lessons don’t apply specifically to getting out of debt
• Success of the discussion portion depends on a volunteer facilitator
• Dave’s big goal is for you to become Mega Rich
• The 13th week is all about tithing to the church (again depends on your views)

How Creating True Financial Independence is different from FPU.

• No religious agenda
• Class is 4 weeks instead of 13 weeks
• Class is focused on helping you succeed at getting out of debt
• Class incorporates concepts from many other books and teachings
• Class is taught by me; a professional coach and facilitator who has successfully gotten out and stayed out of debt.
• A personal finance coach is available outside of class to answer your individual questions.
• My goal is for you to live your dreams and for most people that does not involve becoming Mega Rich.

I hope this helps you understand Financial Peace University and my class Creating True Financial Independence.