Thursday, February 13, 2014

On Dave Ramsey and Physical Fitness

When I taught Personal Financial Planning to undergraduates, I incorporated some of the principles and tools Dave Ramsey promotes that my wife and I have adopted as well as best practices presented by textbooks and other financial planners. The more I've become interested in physical fitness, the more I understand the principles and tools to be essentially identical. I now see fitness coaches/trainers (Tony Horton, Jillian Michaels) as quite similar to financial coaches (Dave Ramsey, Suze Orman). Here are the best practices taught by all:

Step 1: Start keeping a daily spending diary (Ramsey's program omits this crucial first step). Write down how much you spent and what you spent it on every day. That serves two purposes:
  • It makes you more conscious of where your money is going (did I really just spend $1.25 for this soft drink when I could have had three from Wal-Mart for that price?) 
  • It makes it easier to create your allocated spending plan (budget) later. 

The diary (and your budget later) necessitates that you record everything. This requires some discipline but once you do this for 10 days it becomes a habit. 

Step 2: Write down at least one short-term goal and a long-term goal.
  • Short-term goal example: 
    • "Have enough money saved up to buy Christmas presents" 
    • "Pay my rent on time this month." 
    • "Stop eating out as much." 
  • Long-term goals might be:
    • "Pay off my student loans in five years."
    • "Buy a new car next year."
    • "Have $1 million saved for retirement by age 65."
Goals give you your target, your benchmark, and your motivation. Your diary helps you keep track of where you are on the track to hitting your goal.

Step 3: Create your allocated spending plan / budget. 
  • Look back at your diary for the last month. How much did you spend on household items, clothing, gas, etc? 
    • Create categories for these items with a monthly spending target. Put that target at the top of your worksheet or column. (Don't worry, you'll adjust it for later months as you go.)
  • How much do you know you'll need to spend this year for auto title & insurance, Christmas gifts, tuition, etc.? 
    • Create categories for these too with the amount divided by 12--you need to save a little each month to have enough to pay it when the time comes.  
  • How much do you want to save? Make a category for that with a monthly target. 
  • Look at your expected income (weekly, monthly, whenever). Do you make enough to cover all of your targets each month? If not, you need to cut back.
  • Now, as you spend money and keep track, you subtract from your target. If you go over-target in one category you need to offset in another category. For example, when we go over on Household by $30, we may "transfer" $30 from Saving (or another category) to Household. (Email me if you'd like the spreadsheet we use)
  • Adjust accordingly. You may find your planning to spend too much on "Entertainment" or "Eating Out," and too little for "Gas." It's a process, and everyone has different spending/saving priorities. 
  • Be sure to include fun categories in your budget-- movies, date night, etc.

People who are successful at losing weight and getting fit do exactly the same thing: They record their calories: what they ate and how much (including weight). They record their calorie burn with a heart-rate monitor, and what weights they used. They set attainable goals: "Lose 25 pounds by July" or "Reduce body fat to 7%." They plan their meals according to their nutritional needs. They adjust for what they find works best for their bodies--what gets the best results toward their goals.

This takes some discipline. But there are free tools out there to help:
  • Use a spreadsheet on Google Docs to record your spending and workouts (or transfer it from the notebook you carry with you). 
    • Hint: Instead of having specific categories for every item (ie: food, toiletries, cleaning supplies) lump them into broader ones (ie: "Household"). 
    • My wife spends time every week going through our receipts and our bank statement online. This requires pulling out some items from the Wal-Mart receipt that fit into "school supplies," etc. instead of "household" but it's worth the time you put in. It takes discipline, but so does anything worth doing. 
  • Use an app like MyFitness Pal to record your eating and workouts. 
    • The good news is, for just about everything you eat someone else has already entered in the nutritional info! You can even scan barcodes with your phone and it will do it automatically. 
    • Apps also allow you to set calorie and macronutrient targets, so you can easily measure whether eating another ______ is a good idea or not. 
    • Heart rate monitors like Polar and allow you to upload workout data right to a database on their website. 
    • MyFitness Pal also syncs with Fitbit, to record more information. 
  • Use a calorie calculator to figure out what your target calories and macronutrients (protein, carbs, fat) should be to achieve your fat/weight loss goals and maintain good health. 
    • Here are two good ones using the same equations common in the health and fitness industry: 
    • Adjust over time according to what you see works for you. Tom Venuto eats 50% carbs, 30% protein, and 20% fat because that's what gives him the greatest fat burn. I aim for a slightly different ratio. 
Step 4: Accountability and continuous improvement. In the financial world, bouncing checks or not being able to pay your bills goes a long way to keep you accountable. But, it helps to have your spouse (of course) or church group on board with you. Once you're keeping track, it will be easier to stop at Starbucks less and brew more at home. My scale and fat percentage calculator are enough to keep me motivated, but it helps to see what others are doing and learn from them. Maybe I can additional rep or two, or take a few more stairs at work. Our health insurance incentivizes us to make healthy choices, and that helps too.

At the beginning of my classes I take a survey to find out what students (some of whom are middle aged) do for their budgeting. The average response is something like "I know roughly what I spend and what I have in my bank account." They usually don't know what the interest rate is on their credit card, or their annual fee. They understand from either their own past or what they've observed from their parents, that leads to bad consequences-- a bounced check here, or an emergency arises that they cannot cover. The spending diary is a big wake-up call for them, suddenly they have knowledge ("knowledge is power, power is change" - Tony Horton). I find it to be the same in the fitness world, those who take guesses at their calorie consumption/burn don't see the results they want. An early 90's study looked at people who thought they had a metabolism or thyroid issue, after having failed at least eight times on a diet plan. The study found that people were understanding their calorie intake and overestimating their calorie burn-- when put on a controlled program by the researchers, they experienced the same weight loss as the control group. My advice is to do what the pro's do. Don't take shortcuts. Discipline and an organized plan pays off.

Dave Ramsey has the same attitude as Tony Horton. The sarcastic wit, the "duh"- equivalent comments, but also the caring, helpful attitude and constant encouragement.This is why some people love them and are devoted, while others loathe them. But they preach the same message: You can change if you're willing. If you make healthy choices today, you're going to reap the benefit later in life.

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