Tuesday, March 22, 2011

Ooh, I Need That...

“It’s on sale!” you say. “I’ll never get it cheaper!” Or perhaps you are more inclined to rationalize with, “I’ll use that for lots of things, and I don’t have one. I practically NEED it.” Yes, I too practically needed an XBOX 360, Nintendo Wii, cordless finish-nailer, and an iPhone. While these are all great things, and I use them all quite extensively, I can’t really say that I needed them. In fact, as I bought 3 of 4 on credit, I ended up paying a lot more than retail for them, even though I bought them on sale (I’ll explain this some other time when I talk about compound interest).
Some people think debt magically appeared about the same time as credit cards. But debt has been around for a really long time; thousands of years in fact. Why is that, do you think? I believe it boils down to one simple thing. We see something we want, and we’ll do anything to get it. It doesn’t matter that we don’t have the money for it. It doesn’t matter that we don’t really need it, that by buying it I’ll actually increase my expenses just by having it, or that it doesn’t really match anything I own so I’ll “need” to go buy some other stuff now to match it.
Deep down we believe that stuff brings happiness. We are not content with our lives. We compare ourselves and our stuff to the people down the street, down the hall, or down the aisle at church. By having newer, better, bigger stuff, people will think more highly of us. Isn’t that important? Uh, no. Have ever really sat back in your chair and contemplated how great so-and-so is because of the stuff they have? If someone is nice they’re nice. If they're a *@$^~# then they’re *@$^~#. They’re stuff has nothing to do with it.
So why do we chase "stuff"? It’s very easy to blame it on our society. With all the advertising and slick marketing campaigns, I don’t think it’s wrong to place some blame there. But the majority of the blame rests with us, you and me. We decided we'd go with it. We decided to buy that, and that, and maybe even that over there. No one made us. We can continue to ride the tide of stuff and status, or we can stop, stand in the water, and take our licks as we go against the waves that will try to pound us into submission and conformity. You will probably fall, I have. Some of the waves are pretty big and they pack a mean punch. But I have gotten up again, and so can you. I can see the beach ahead of me, and I’m going to make it. Will you allow the tide to pull you off into the middle of the ocean where there’s nothing to do but drown, or will you stop, stand up tall, and take your first step?
~Kevin

Friday, March 11, 2011

Financial Freedom Requires Transformation

We are planning a beach vacation for this summer and I cannot wait.  Seven days on a semi-private beach with my fantastic family, great friends, and free time.  It will be amazing.  I do have to admit there is one thing that I am NOT looking forward to...  wearing a bathing suit.  Yep, the thought of wearing a bathing suit makes me cringe.  Don't get me wrong, I know that I am not overweight and I do not have self-image issues.  However, I do realize that I have some lumpiness in some places that are just not attractive.  I would be quite content with hanging on the beach in shorts and a tank top, but to put on a bathing suit...  no thank you.

The question to ask is, "What am I going to do about it?"  To simply realize that I am not comfortable in a bathing suit because of the extra lumpiness is not enough.  I can choose to wear a bathing suit and just deal with the lumpiness while on vacation, but doing so changes nothing.  I know that those lumpy places can begin to go away if I eat well (which I am on the track of doing) and if I begin to exercise more.  It also requires that I put a plan in place, change some things, and transform my thinking.

The same is true for our financial lives.  Once you recognize that you are in financial bondage, you must begin to take steps to get out of it.  Simply recognizing where you are will do nothing.  If you want things to change, you must begin changing things.  Put a plan in place -- begin using a budget.  Begin to change your approach to spending -- stop using the credit card.  Begin transforming your mind by looking at your money differently.  The Bible tells us that if we are going to live in a God-honoring manner, we must move away from this world and allow our minds to be renewed.  Romans 12:2 (New Living Translation) states, "Don't copy the behavior and customs of this world, but let God transform you into a new person by changing the way you think.  Then you will learn to know God's will for you, which is good and pleasing and perfect."

Transformation is an active choice.  It requires more than just trying to "do better."  It requires an agreement and an allowance for God to do substantial work in your life.  It requires an admission that the way you have been doing things was wrong and a submission to allow God to do a transforming work in you.  Transformation is not an easy road.  It could be short or it could be long.  Along the way you'll continually have to choose whether or not to quit or to endure.  But the road of transformation will get you to your destination -- financial freedom.

I am going to develop a plan to be in better shape before our vacation this summer.  If you want to hold me accountable to that, I may accept your offer.  However, you have to agree to be accountable to the transforming work that needs to happen in your financial life.  You can do it.  I can do it. We can travel the road of transformation together.
~Alesha

Monday, March 7, 2011

The B Word

Let's take a closer look at that B word – the budget.  When you hear the word “budget” what comes to mind?  Dictionary.com defines the word budget as “an estimate, often itemized, of expected income and expense for a given period in the future.”  An accounting textbook defines budget as “a comprehensive financial plan setting forth the expected route for achieving the financial and operational goals of an organization.”  John Maxwell defines a budget as “Telling your money where to go instead of wondering where it went.”  We are going to define the word budget as “an itemized plan of how you are going to kick the enemy in the teeth in order to get out of financial bondage and live a God-honoring lifestyle that will not only bring financial freedom but financial peace.”

And let it be known that your money is not the boss of you!  The budget is the boss of your money and you are the boss of the budget.  You budget is a plan for your money, and at the beginning of each month you will establish a plan and give every dollar a name.  Your financial situation will not spin out of control because you have a plan.  Having a plan is half of the battle.   By the way, a written plan, if lived on and agreed to by parties, will remove many of the money fights in your marriage.

Let’s take a few minutes to consider a very simple budget plan.  It is the 10-10-80 budget style and it is quite simple… you give 10%, you save 10% and you live on 80%.  This is definitely a budget style that you can live with.  You have the opportunity to live on 80% of the income you receive.  It’s more than a majority, and is actually quite lavish.  However, if you have debt payments, this budget style may be adjusted to 10-10-10-70…  you give 10%, save 10%, pay down debt with 10% and live on 70%. Of course these are merely guidelines to consider.  You want to work out a plan that best suits your financial situation.  Working with your budget and your financial goals will help determine how you will divide out the remaining 80%.

When you have completed the budget, you will be in one of three groups…
1.       Expenses are greater than income
2.       Income is greater than expenses
3.       Expenses and income equal and you have a $0 balance budget
The final objective is to have a $0 balance budget.  If you are in group 1, then you may want to go back through the budget and consider any reductions that need to be made.  If you are in group 2, look at your budget and determine you want to use the excess for additional giving, savings or debt repayment.  The ultimate goal is that every dollar earned has a place to go.  Not giving every dollar a place to go can result in overspending.

Throughout life, school, and jobs you are presented with challenges.  A challenge is a call-up to how you are going to confront something.  I have a challenge for you.  The challenge is this… with your next paycheck use the 10-10-80 budget plan.    Yes, give a tithe of your income from that check.  Put 10% of your paycheck into savings (which is a good way to work on your emergency savings).  Use the remaining 80% for debt repayment and whatever other expenditures you need to make.  In Malachi 3 God says to test Him in your giving.  Go for it!  Test Him!  Test my words in this.  Take this challenge and give the 10-10-80 plan a try.  I don’t think you’ll regret it.
~Alesha

Tuesday, March 1, 2011

Its Going To Rain

A while ago our furnace was making a funny noise and our house wasn’t as warm as usual, so I called the repairman to come out and look at it. Our furnace was only a couple years old, so I assumed it was something minor. As it turns out, one of the fans needed to be replaced. Fortunately, it was still under warranty so we didn't have to pay for the part, but the labor cost was $600. This was an emergency, so we just put it on a credit card. No big deal. That’s what credit cards are for, right?
Murphy’s Law says, “Anything that can go wrong, will go wrong.” As we look back now and see that we addressed all of our emergencies – real or imagined – with the Plastic Protector of Life (AKA Visa) and his equally plastic sidekick MasterCard it’s no wonder that we ended up in debt. Credit cards are like screen protectors. If you put them on your phone or touch screen device you’re trying to protect the way your device looks, right? If you drop that phone or touch screen device, does that screen protector actually protect the screen? No. You needed something more durable than that little piece of plastic to protect your device.
Emergencies are like those drops, those accidents that just seem to happen. The storms of life swirl around us all the time; car accidents, car repairs, broken windows, job loss, or even your kids needing new clothes because they have grown. The only way to really protect yourself from those emergencies is to put something in between you and them. You do this in two ways. The first is to have adequate insurance to cover the big things like home replacement, devastating medical issues, and things like that. We’ll talk about insurance more at another time. The second way is to have an emergency savings built up.
Emergency savings is simply a savings account that you have set up to use only in case of an emergency. It’s not for rainy day trips to the mall; it’s for rainy days that cause leaks in the roof. Remember grandma used to say, “Save that for a rainy day”? Grandma’s roof leaked before too. So, before you do anything else, before you even start trying to get out of debt, set some money aside in case of emergencies. That way, when you’re a few months into your plan to reduce your debt, you can use your emergency savings to pay off that accident or address that emergency without incurring more debt. Set up something now, and set an achievable target.  Try to get $1,000 to $2,000 in an emergency savings account in the next 1 to 3 months. It will take some sacrifice to do that, to be sure, but you’ll be surprised how accidents happen a lot less frequently when you’re prepared for them.
~Kevin