Principle #5: Set Your Price Limit… Then Sleep On It

July 26, 2012 § Leave a comment

Isn’t it amazing how some babies can sleep so peacefully. They don’t have a care in the world, because they know that they are in the arms of loving, nurturing parents that won’t let them miss a single feeding or diaper change. They live a life of no burdens and no obligations.

“How great is the love the Father has lavished on us, that we should be called children of God! And that is what we are!” 1 John 3:1 (NIV)

I’d again like to credit Orrin Woodward‘s book, Resolved: 13 Resolutions for LIFE, as it is in his eighth chapter that he addresses the resolve to improve one’s finances. It is by following his financial principles that my wife an I were able to dig ourselves out of debt.

This fifth principle is another one that does not require much sacrifice, yet has the power to completely change a person’s finances.

“When a person desires financial freedom more than he desires things, then he will get his freedom by allowing many things to remain un-purchased.” –Orrin Woodward

The Impulse Buy

Impulsive, impatient purchases are debt’s best friend.” -Dave Ramsey

Impulse buying will blow your budget out of the water. It will sink your battleship. I know that this sale is today only… I know that this is the only red one they have… I know that without this you, your spouse, or your kids will never be able to be seen in public again… But you have to think of this as a law:

Set Your Price Limit and Then Sleep On It!

Chris Brady and Orrin Woodward describe two types of people who struggle with impulse buys:

  1. Some people will penny pinch all year long, reusing paper lunch sacks, turning their underwear inside out, and shifting their car in neutral every time they hit a downhill slope. This same person will come home one day with a new motorcycle, boat, $400 golf club, iPad, infomercial juicer, or a bangin’ new designer handbag.
  2. The second person does not make any large purchases, but instead nickel and dimes themselves into oblivion. They get their hair cut and highlighted, nails done, Starbucks anyone (?), candy bars, girl-scout cookies, valet parking, or eat-out for lunch and dinner several days per week. I could go on, but I’ll spare you.

There is nothing wrong with an occasional large purchase (if it has been calculated, budgeted, and can be paid in cash) or with an occasional small purchase, but there is a better way of managing your money.

Orrin Woodward earns millions of dollars per year and claims that he and his wife Laurie have a set price of $500. If either of them find an item they’d like to purchase that is more than $500, they follow their self-imposed rule, and go home to think, pray, and sleep on it.

Now, if their income is so high, yet their set price is only $500, do you think it might be a good idea to set your price limit a little lower? I would suggest $50 or $100 to start.

In addition to just setting this limit, you should budget that amount into your monthly budget — meaning that you can only make that sort of purchase once a month. Just because an item is less than your impulse buy limit, does not mean that you should buy it.


I apologize for having taken a short break from blogging without notice. A very close friend of mine died in a motorcycle accident, leaving behind a young pregnant wife. Please keep her in your prayers, and if you’d like to contribute to supporting this widow, please contact me, and I’ll give you instructions.

As always, I appreciate your comments and suggestions, so please feel free to comment below.

Keep Reading and Leading!

David J. Garza


7 Characteristics of Debt-Free People

July 9, 2012 § 2 Comments

Below is a blog article from Dave Ramsey’s website (Click Here to go to the site). I thought this would be a nice little diversion from our 10 Principles series. Enjoy:

7 Characteristics of Debt-Free People

Family #1 manages to pay off $40,000 in debt in two years on a $35,000 annual income. Family #2 makes $100,000 a year but can’t seem to make the slightest dent in the same amount of debt.

Why is that?

Obviously, the second family has a spending problem. They make plenty of money—more than enough to pay off that debt in two years. But they have so much money going out, they can’t keep their head above water.Whether it’s in the form of an overbearing mortgage, credit cards, a hefty car payment or just making poor choices like eating out every night, their debt keeps them from making progress.

So all of their income gets sucked up by other stuff, which leaves them making minimum payments on their debts and never gathering any momentum. It’s a difficult, stressful way to live.

At some point, people who become debt-free decide that enough is enough. Their old lifestyle wasn’t working, and they’re ready to make some serious changes. It’s like they have a personality change, but that’s not what really happens. All they are doing is rediscovering aspects of their personality that have always been there.

So what are some of these traits of people who get debt-free?

They are wise.

People who decide to ditch debt for good realize that debt isn’t a tool. While their FICO score may go up, their net worth goes down. They treat debt like it’s a skin disease—which isn’t a bad idea. Don’t you wish you could wipe away debt with a little Benadryl cream?

They are patient.

Someone who really wants out of debt can walk right pass the shoe aisle or the flat-screen TV aisle without blinking. Why? Because they know all of that stuff can wait.Impulsive, impatient purchases are debt’s best friend.

They are confident.

People who are getting out of debt don’t care what others think. You know you’re on the right track when your broke friends are making fun of you. Getting out of debt can require drastic lifestyle changes, which means you’ll never succeed if you aren’t mentally prepared and confident in your decision to find financial peace.

They are goal-driven.

No-brainer, right? Getting out of debt is a goal in itself, so of course people who want to get out of debt are goal-oriented. But the catch here is that these people do more than just set goals—they map out how they plan to get there. That’s what Dave’s Baby Stepsare all about—small goals that lead to the one giant goal of being debt-free!

They are responsible.

Getting out of debt takes a sense of responsibility and maturity—two traits that match up well with patience. And maturity has nothing to do with age. Some 50 year olds still treat money the same way they did when they were 20. They just have more of it now. When you’re responsible, you want to get out of debt as fast as possible so you can begin saving, putting money into a college fund, investing, and paying off the mortgage early.

They are not materialistic.

Becoming debt-free isn’t about stocking a garage full of cars and living in an eight-bedroom house. The purpose is to change your family tree for generations to come, helping others along the way. Materialism can affect any of us—rich or poor. It’s all about how much importance we place on stuff.

They are willing to make sacrifices.

Eating out. Cable. Going to movies every week. These are the types of things that might have to go while you’re getting out of debt. But keep in mind: Budget cuts are just temporary. When you’re debt-free, you can begin slowly adding those things back into your lifestyle.

The bottom line? You have to be motivated and do something about it over time.

If you want to get out of debt, you can get out of debt—no matter how much money you owe. Even if you don’t think you’re particularly strong in all of these characteristics, you’ll be amazed at how your perception of “wants” and “needs” will change once youstart the Baby Steps.

When you’re motivated, passionate and even a little angry, you’re more than willing to do whatever is needed to find financial peace. Everything else will take care of itself.

What are characteristics you’ve noticed in debt-free people that you’d like to mimic?Leave a comment to share your insight.

Principle #4: Never Finance ANYTHING That Depreciates

July 5, 2012 § Leave a comment

Principle #4 is all about the concept of what is called “delayed gratification”. I know, sounds complicated, right ;-) Delayed gratification means that you delay (put off till another time) the purchase or acquisition of something you think will be gratifying (bring pleasure, usually momentarily). I say this in jest because it seems that so few people in today’s western society have the slightest amount of delayed gratification. We as a people are known worldwide for our consumption habits and lack of personal discipline. However, since most people are swamped by debt, usually for perceived “needs”, let’s just make it our goal to NOT be like most people.

Depreciation Defined

Google defines “depreciate” as:

de·pre·ci·ate   /di•prē•SHē•āt/

  1. Diminish in value over a period of time.
  2. Reduce the recorded value in a company’s books of (an asset) each year over a predetermined period.

That said, the idea here is to never finance (lease, loan, borrow to purchase, etc.) anything that will lose value over time. Here are some examples of items that depreciate:

  • cars
  • motorcycles
  • ATVs
  • computers
  • TVs
  • stereos
  • furniture
  • entertainment systems
  • carpet
  • blinds
  • lawn mowers
  • jewelry

You get the idea.

The Numbers

Let’s take a quick look at the true cost of financing items that depreciate. In the first example we’ll look at one of the most common mistakes that people make: the leased car.

Early in our marriage, we were given some advice (note: NOT good idea), “If you just build a car payment into your budget, you can drive a new car every 3 years. It’s great. You’re always under warranty, and you’re always in a newer car.” We took this advice, and just recently got out from under the last lease. I tell you this so you know everybody is tempted by this enticing offer.

Example Calculation Using the Leasing Formula (borrowed from

Let’s assume you’ve decided on 3-year (36 month term) lease of a Toyota Camry XLE that has a sticker price of $24,600 (MSRP).
You have managed to negotiate the price down to $23,000 (Cap Cost). You decide not to make a down payment, but you have a trade-in worth $5000. Your Net Cap Cost is therefore $23,000 – $5000 = $18,000.
Now, the dealer tells you (because you asked) that the Money Factor is .00375 (.00375 x 2400 = 9.0%) and the Residual Percentage is 60% of MSRP. So your Residual amount, in dollars, is .60 x $24,600 = $14,760.
Now let’s do the math:

Depreciation Fee = ( $18,000 – $14,760 ) ÷ 36 months = $90.00

Finance Fee = ( $18,000 + $14,760 ) × .00375 = $122.85

Sales Tax = ($18,000 x .08) ÷ 36 = $40.00

Monthly Lease Payment = $90.00 + $122.85 + $40.00 = $252.85
(sales tax included)

In this example, you have a monthly payment of $252.85 over 36 months, which means that at the end of your lease (assuming you stayed within miles, didn’t dent the car, and don’t have to replace the tires, etc) you will have paid $9,102.60 for a car that you don’t even own. If you’d like to buy the car at this point, you’d purchase it for $14,760. In essence, leasing a car is just a fancy finance term for renting. Most people would never rent a car for 36 months, so don’t lease either.

Again, I am guilty of falling into this trap (more than once), so I am not condemning you if you lease.

Suggestion: Whenever you can, get out of your lease, and purchase a car for cash. It pays!

Lastly, let’s look at the true cost of making a financed purchase of a motorcycle (yes, I’m guilty here too).

Let’s say that you went to the local Harley Davidson dealer and picked out a brand spanking new Road King (MSRP about $20,000). You talk them down to $18,000, and put down another $3,000. Your total financed amount would be ($18,000 + $1,440 tax) – $3,000 = $16, 440 (assuming an 8% Sales Tax rate). Assuming a 6% loan rate over 60 months, your payment would be $317.83/month.

At the end of your loan term, the cost of the bike would actually be about $27,000 ($19,069 sum of payments + $3,000 downpayment + $5,000 depreciated value). My question is this: would you ever pay $27,000 for a base model HD Road King?

Please watch the video below… it makes a simple point: If you don’t have the money, DON’T BUY IT! (PS, it’s funny)


Principle #3: Reduce Expenses to 75% of Net Income

June 29, 2012 § 3 Comments

For the first two principles we were in data acquisition mode. The sole purpose of Principle #1 and Principle #2 was to figure out what your financial situation looks like. You may have found out that you are doing great and reaping monetary gains each month; or you may have found that your spending is out of control, and you need a change. Well, buckle up… because this is where we take action.

Principle #3: Reduce Expenses and Increase Income to Spend No More Than 75% of Your Income.

The Offense and Defense of Personal Finance

Best selling authors Chris Brady and Orrin Woodward have a fantastic audio CD called, “The Offense and Defense of Personal Finance”. On that CD, they lay out a great analogy when it comes to thinking about money. Basically, this is the idea: in sports, offense can only do so much, and defense can only do so much. To be really great, you must have both.

“You have to earn more than you spend… AND you have to spend less than you make.” –Chris Brady

  • Offense: Find ways to increase your income. Can you work some overtime each week? Can you mow lawns, paint houses, fix up cars or computers? Have you considered a side business? My business of choice is the LIFE Business, where you can earn an income by leveraging information into people’s lives to help them experience positive change, thus making money and making a difference. The baseline monthly cost is about $50, which can be earned back and profiting within the first month.
  • Defense: Find ways to cut your expenses. This is one of the most simple things that a person can do. It does not require any extra work, yet it pays huge dividends. If you can just develop some self control in the area of spending, you’ll find that your paycheck will go a lot further. Can you buy less expensive foods? Can you wash your own car by hand instead of going to the carwash? Can you downgrade the cable, or get rid of it all together? Can you downgrade cell phone plan, or go to a month-to-month carrier like Virgin Mobile? Can you sell your newer car to buy an older model for cash… saving the monthly payments? How often do you eat out? If you cut one $25 expenditure per week, you just gave yourself a $100/month raise.

You get the point: Try to earn more AND spend less. What is amazing about these 10 Principles is that you can get completely debt-free without increasing your income. Remember: Money is not power. Knowledge applied is power… so use it! We are trying to free up some cash to work on our debt.

The Numbers

To stick with our previous example of a household gross income of $50,000, we figured out that our actual deposit to the bank (after taxes, tithe, etc) was $2,983/mo (see Principle #1). Let’s just assume that you did not go out and attempt to earn more. In order to adhere to Principle #3, you would need your TOTAL expenses to be no more than 75% of net income, or $2,237… giving you $746/mo to utilize wisely in other areas.

Now you may ask, “75%?!?! I can’t live on that little!” Here’s the truth, you personally know at least one person who lives on less than 75% of what you make… and that person knows someone who lives on 75% of what they make. It is possible, it just takes sacrifice.

“Quit trying to keep up with the Jones’s because the Jones’s are broke… Stop attempting to look wealthy and start applying the principles to become wealthy.” –Orrin Woodward

Fight the Good Fight!

This is the first step that will force you to make some tough decisions. Remember, you are choosing to do something that millions of people across North America have chosen not to do. You are breaking the chains of bondage from your finances. Pay the price… do what it takes… fight the good fight, it’s worth it!

“Few things allow someone to sleep better than a healthy financial position.” –Orrin Woodward

If you’ve decided to take this journey, post in the comments and let me know your thoughts.

Keep Reading and Leading,

David J. Garza

Principle #2: Identify ALL Expenses

June 26, 2012 § 1 Comment

This second principle has the power to transform your mentality forever: Identify ALL Expenses. If you took part in Principle #1, you have figured out what you actually make. Now we must figure out what is going out.

Most people’s financial situation is like the image above: it comes in and then it goes out (PS: In-N-Out Burger, Please come to the East Coast!). You’d be surprised how many people have no idea where their money is actually going. Rachel and I were fairly frugal, but when we actually went through this step of tracking expenses, we were floored. It totally explained how we could earn more than ever, yet still have very little, if anything, left at the end of the month.

The key here is to write everything down. Claude Hamilton, a leadership coach in Canada, suggests that you carry a small notebook around with you to write down every penny that leaves your pocket (stick of gum, cup of coffee, 50 cent toll, etc). In Orrin Woodward’s Resolved book, he states,

Anything that flows out of one’s possession into another entity’s hands should be written down: all bills, all taxes, everything that flows out of [your] money pile and into someone else’s money pile.

Your recurring expenses will be the easiest. Just go through your past few month’s of bills and write down each one. The harder part is accounting for the miscellaneous expenses to maintain cars, houses, unexpected events. Be liberal when counting your expenses. You can try to deny that spending is out of control, or you can face the brutal reality.

Remember what I said earlier: be conservative when estimating your income and be liberal when estimating your expenses.

If spending frivolously is an issue, a person should start a cash allowance, setting aside a certain amount of cash for himself and spouse to limit spending within the set limits. –Orrin Woodward

These first two principles are all about acquiring knowledge. You may have heard the statement that, “knowledge is power.” This is FALSE. Knowledge applied in a purposeful direction is power. The next step will challenge us to do just that.

Stay tuned for Principle #3: Reduce expenses to… (see you soon)

Keep Reading and Leading,

David J. Garza

Principle #1: Identify Your NET Income

June 21, 2012 § 2 Comments

Ignorance is bliss, until you’re bankrupt.

The key to the first two principles is that knowledge is power. If you don’t know exactly how much is coming in, you’ll have no idea how much you need to cut going out. So the first logical step is to: Identify your NET Income.

Net Income Defined defines “net income” for an individual as:

Gross income minus taxesallowances, and deductions. An individual’s net income is used to determine how much income tax is owed.

According to Orrin Woodward, “Your Gross Income is the amount you tell your friends that you earn, while Net Income is the amount you tell your spouse.”

For simplicity sake, we will use a salaried employee as an example. If a person is salaried at $50,000 per year and is paid twice monthly, his GROSS Monthly Income is $4,166.67 ($50,000/24 paychecks =2,083.33 x 2 paychecks per month). While this amount is important to know for calculation’s sake, it is otherwise irrelevant. This person’s actual income is NOT $4,166.67.

Take that Gross Monthly Income figure and subtract all those wonderful government programs that you are unwillingly volunteering to fund (ie. Federal and State Income Tax, Social Security, Medicare, etc) , subtract your medical, dental, vision, and FLEX benefits (assuming you have those), and subtract your 401K contribution. For this example we’ll assume that after subtracting these items, the direct deposit to the bank is roughly $3,400.

Personally, I wouldn’t stop there. The Bible talks of your tithe as your “first fruits”. So, if you believe that the Bible is true, and you claim to trust God with all areas of your life (including finances), I would strongly suggest tithing from your Gross Income because that is your true first fruits. Trust me; you will not regret it. This should bring us to a true NET Income of $2,983 ($3,400 – $417 tithe).

Do the same calculations with any second income or other guaranteed income (pensions, annuities, etc). As a rule, be conservative in calculating your income, and liberal when calculating your outgo.

NO “If-Come” Money

An important note that Orrin makes in his Resolved book is that you should NEVER count on potential raises, bonuses, or windfalls of any sort. This is considered “If-Come” money. “If I get a raise, then I’ll be able to pay off my debt.” If-come money doesn’t pay the bills, only Income will – especially income with a solid plan and discipline behind it.

Go Do It!

To conclude, I would encourage you to sit down with your pay-stubs, calculate your net income and tithe amounts, and prepare yourself for one of the most gratifying experiences of your life. Resolving to develop financial intelligence can be a tough and daunting task, but let me tell you this, if you stick to it and learn to change your old habits, you’ll wake up with a smile knowing that no one owns you anymore!

Did I miss anything? Leave a comment below.

Stay tuned for Principle #2: Expenses…..

Keep Reading and Leading!

David J. Garza

10 Principles to Increase Wealth

June 19, 2012 § Leave a comment

When Rachel and I tell people that in 3 years we have paid off all of our debts (over $35,000 other than mortgage), the common response is, “Oh, that’s nice,” or “Good for you.” It seems as though most people are either debt free (most are NOT), think that not changing anything will work just as well (it won’t), or they have resigned their life to living with the burden of debt (sadly, most have).

Over the next couple of weeks, I’ll be sending out the 10 Principles that we followed to pay off our debt, increase our savings, and increase our giving… so definitely stay tuned. If you follow the first three or four steps closely, you can be debt-free within the next 3-years (as proven by the thousands of people helped through the LIFE information).

Just a quick note:
These 10 Principles are not my own, but were learned primarily through the LIFE leadership information. Also, we used a number of different resources to get the right mindset to tackle our debt:

  1. Maximize Your Finances Pack – 4 CDs and 1 book – This CD pack has some phenomenal information in it. One CD in particular, “The 10 Laws of Debt Management” by Orrin Woodward, is what inspired this series of posts. Also, the book, The Richest Man in Bablyon really simplifies what your mentality should be like when it comes to finances. To get a Maximize Your Finances Pack, Go to, or click here (reference Member ID #61237401)
  2. Resolved: 13 Resolutions for LIFE by Orrin Woodward – Chapter 8 is all about resolving to live intentionally in your finances. Orrin goes over each of the 10 Principles in much more detail.
  3. I also started listening regularly to the Dave Ramsey show. He has very practical advice on debt reduction. I have heard that many people have used his Total Money Makeover program successfully, but we didn’t use it, so I can’t personally endorse it.

To conclude… keep your eye out for the upcoming series, and definitely make the choice to live intentionally with your finances.

Keep Reading and Leading!

David J. Garza

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