Easy Three-Step Plan to Financial Success

Here it is.  An easy, 3-step outline to household finance success.

1. Live on less than you make
2. Don't borrow money (except for a house)
3. Save for future wants and needs

Sounds easy, huh?  Well it might sound easy, but for many of us the execution of this little 3-step plan can be as elusive and difficult as scaling Mt. Fuji. 

"Why?" you ask.  "It looks pretty simple to me" (yes I heard you).  Well, the plan IS simple from a mathematical standpoint.  Addition and subtraction is all that's needed for the most part.  Some planning is required, but the hard part of successful money management is self discipline.  Ouch.  That sounds like it could be painful.  And at first, yes it is (a little).  Later though, the planning and discipline brings about a result of financial peace, which is super-sweet.

Close your eyes and dream with me.  You're sitting on the porch swing with your spouse drinking tea and you have no debt other than the house, the bills are all paid and you have money in the bank in case there's an emergency.  You have saved for Christmas and a nice vacation.  Likewise, college and retirement savings are on track.  You are tithing at your local church and you are able to give generously when you see a need a feel led to do so.  Life is good, is it not?

Now open your eyes and lets get back to reality.  The 3-step plan above really is the road map to the dream life.  However, executing the plan requires us to turn off the TV once in a while and do some planning.  We have to make and live on a budget and then tell ourselves "NO" sometimes.  Most of us don't like to do that.  I know I don't.  Those of us that are married have to sit down and communicate with our spouse regularly and reach agreement on our plans.  This means listening to each other and practicing some unselfish give and take.  Couples have to work as a team and be accountable to each other to stick to their budget.  All this requires a good bit of time and effort the first time you do them.  After a while, it gets easier.  If you have the persistence to continue to make a plan and follow it over time, your dream can become your reality.

Just to be clear, though, I'm not talking about living like you're in a straight jacket - having no life and no fun and eating dried
beans every meal (although a little self-denial might do some of us good).  I'm talking about being diligent, working together with our spouses, planning ahead and exercising reasonable restraint in our lives so that we can live more happily and avoid the frustration, anxiety and pain that inevitably comes with sloppy, lazy or non-existent household money management.

For more detailed, practical instructions on how to manage your household finances, I highly recommend that you attend Dave Ramsey's Financial Peace University.  Its the most effective way to learn household money management available.  Dave presents the material in 9 easy-to-understand lessons on DVD.  You can attend a class at a local church (click here to find a class near you) or take the class online.  Couples should definitely go through the class together.

I hope this helps!  Leave me some comments down below!   What topics would you like for me to write on in the future?

Financial Peace University at GFBC

Please be aware that Gardendale's First Baptist Church, at 316 Mountain Crest Parkway, Gardendale, AL, will be hosting Dave Ramsey's Financial Peace University class beginning Sunday, September 14th, 2014 at 6:00 pm.  The church will pay for a large portion of students kits from Dave Ramsey.  Students only pay $50.00.  Couples can share a kit.  The class will be held in room 111.

All are welcome!

The Incredible Tithe

Tithing.  It's a very clear and tangible way we can say "I trust you God".   So awesome how He uses tithing to bring about a change in our hearts from selfishness and an "I'm in control" attitude to daily dependency on Him, contentment, and generosity.  To be sure, God doesn't need our money.  Tithing is for us.

I've known couples who were having great difficulties making ends meet until they prayed together and agreed to begin tithing.  First fruits off the top.  After that, they always had enough.  It happens again and again.  Only God can do that.

A Tithe is a Tenth 

The Hebrew word "maasar" used in the original Bible texts literally means "a tenth part" and is translated to the English word "tithe" in the Bibles we read.  The words "tithe" and "tenth" are synonymous.

I've heard the arguments about the tithe being part of the Old Testament Law and therefore doesn't apply to us anymore.  That's not quite right.  In fact, tithing is pre-mosaic law, it's in mosaic law, and even mentioned multiple times in the New Testament.  Once by Jesus Himself  (See Gen. 14:18-20, Gen. 28:22, Lev. 27:30, Matt. 23:23, Hebrews 7:4).

Robbing God

Malachi 3:8-10 “Will a man rob God? Yet you are robbing Me! But you say , ‘How have we robbed You?’ In tithes and offerings . You are cursed with a curse, for you are robbing Me, the whole nation of you!  Bring the whole tithe into the storehouse, so that there may be food in My house, ...

God's Promise

Malachi 3:10 ... and test Me now in this ,” says the LORD of hosts , “if I will not open for you the windows of heaven and pour out for you a blessing until it overflows . 11 Then I will rebuke the devourer for you, so that it will not destroy the fruits of the ground; nor will your vine in the field cast its grapes,” says the LORD of hosts. 12 “ All the nations will call you blessed, for you shall be a delightful land ,” says the LORD of hosts .

Wow.  Now that's a blessing I want for me and my family.  Are you tithing to your local church?  If not, I hope that you will discuss it with your spouse and pray about it.  I believe the road to true financial peace begins with the tithe.  It did for my family.

Powerful Free Tool From Morningstar

Have you ever used Morningstar's mutual fund comparison tool?  If not, you might want to check it out at  http://screen.morningstar.com/Compare/Fund/FundCompare.html.

With the comparison tool, you can enter the ticker symbols for multiple mutual funds and compare their performance data up to 5 years.

You can also view a relative risk comparison and tax information.

Lastly, you can view the "Nuts and Bolts" screen, which shows front/back end loads, fund manager's name and tenure information, cost index (operating costs).

To get started, go to http://screen.morningstar.com/Compare/Fund/FundCompare.html.  If you don't already have an account at Morningstar, you'll need to create a free account in order to access the tool.

Give it a try and let me know what you think.  I hope this is helpful to you!

Marriage and Money

In his excellent article entitled "Why One of the ‘Worst Financial Mistakes’ Is Actually One of the Best Money Moves", Matt Bell of SoundMindInvesting points out that a married couple keeping separate accounts is troublesome and often indicative of current or future problems in that marriage.

I couldn't agree more.  Over a decade of professional training, teaching household finance and counseling with married couples has shown me that a healthy marriage requires open communications and teamwork, honesty and trust, not self-centered defensiveness.

The Relationship is Vital
Without communication there IS no relationship.  Without a relationship, a couple is in a co-habitation situation, not a marriage.   If there was just one piece of advice that I could offer you to make you more prosperous and happy this would be it:  Communicate with your spouse about money.   Often.  Work hard to understand your spouse's fears, goals and desires and let yours be known.  Spend as much time as it takes to understand each other and come to agreement regarding how your money will be spent, saved and given to others.  Your marriage is worth it.

Men
Go back and read the relationship paragraph above again.  We men must understand the importance of communication.  We aren't often good listeners.  We should lead in our homes by ensuring that this communication and teamwork occurs and by earning and keeping the trust of our spouse.  That means we don't make large purchases, give large gifts, or make any major financial commitment without first seeking the counsel of our spouse.  If you and your spouse cannot agree on it, don't do it.

Ladies
Ladies most always get the relationship part.  No need to re-read that.  Please do not listen to those radical feminists who tell you that you should always prepare for the possibility of a breakup. What they are missing is that when we marry, we become one flesh (Gen 2:24).  To prepare for a breakup means never having been fully committed to the marriage in the first place.  Like with the men, you must earn and keep the trust of your spouse by not hiding things from him.  Cooperate with your husband to agree on how your money will be spent, saved and gifted.  To lead separate financial lives is to invite disaster into our homes.  Mark 3:25 says "A house divided will not stand".

Focus on the Big Stuff First!

Good morning! This excellent post at Faithful with a Few (one of my favorite Christian finance sites) points out that we should take care of the big and important things before we sweat the small stuff.  This is an important truth and so I will make the same point in a little different way.

I have taught a Biblical Household Finance class at my church for many years now.  Often in a class discussion, someone (usually a lady) will go into great detail about how they save a ton! of money couponing or grouponing.  One student communicated proudly that he was saving a boat load of money on gas because he bought himself a motorcycle.  On credit.  Except for his upside-down economics, I really like the way this guy thinks.  :) I been wanting a motorcycle for a long time myself, but mama is terrified of them so no go on da bike.

Let's take a friendly shot at the coupon lady first.  Not that I want to discourage or discount any efforts people make at saving some pocket money.  Everyone knows the old saying: "a penny saved is a penny earned".  That's very true.   However, its just a penny.  Couponing tends to affect the short term.  Maybe save you a few bucks that you can spend somewhere else.  Does it positively affect your long term?  Probably not.  Yes, I've seen the TV show about the whacked out lady who brings home two carloads of stuff for $6.72, but that's not most of us, OK?  Even if it was, I have my doubts about the real economic benefit that 1240 tubes of toothpaste brings to a household anyway.

Now lets poke a little at the motorcycle guy.  Let me get this straight:  you borrowed $12,000 (totally a guess) to save the difference between a 10 mpg truck and a 30 mpg motorcycle?  Are you serious?  Let's do a little math.  Gas is currently about $3.50 per gallon.  Assume you drive 20 miles daily round trip to work.  The 20 mpg improvement in gas mileage would save you a gallon of gas, or $3.50 per day.   That totals up to $17.50 in a 5-day work-week or $70 per month.  The payment on a $12,000 loan at 5% for 48 months is $276.  Interest alone on the borrowed money is $50 in the first month!  So I took on a four year $276 loan payment to save $20 a month in gas.  Not a good plan unless you really just wanted a motorcycle, in which case its brilliant!

Bottom line: To affect our long term net worth, we have to:

• Get and stay on a budget 
• Get out of debt
• After consumer debt is paid off, our budget should include long term investments.  It doesn't make sense to invest until the debt is paid off, though.  Debt is like negative investments.  The best place to invest until the debt is paid off is in debt repayment.  I'll follow up with a whole write-up on this soon to make this point in more detail.

To the extent that pinching pennies enables you to accomplish these goals, more power to you couponers and grouponers!  But if you're really just freeing up some pocket money to go to spend somewhere else, why bother really?  At the end of the day, all the money's gone.

Who's in Control of our Finances?

Here's one of my favorite Bible passages.  It's like a praise and worship service on its on. It also reminds us who is in control of our finances (and everything else).

1 Chronicles 29:11-12: "Yours, O Lord, is the greatness and the power and the glory and the victory and the majesty, indeed everything that is in the heavens and the earth; Yours is the dominion, O Lord, and You exalt Yourself as head over all. Both riches and honor come from You, and You rule over all, and in Your hand is power and might; and it lies in Your hand to make great and to strengthen everyone."