Managing Money God’s Way

The second Biblical Financial principle was to start saving money.  Today we introduce the third principle which is the key to saving money.  This principle is very simple, but not always easy.  In order to start saving money you have to stop spending everything you make.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

This is the single most important rule of money management.  You only have a finite amount of money, and when that is gone, you can’t keep spending by using credit.  The new definition of being able to afford something needs to become, “I have the money to purchase it”.  If you can’t pay for it, you can’t afford it.

Unfortunately, society has a different definition of what it means to afford something.  If you go to the loan officer, he or she will tell you that you can afford anything if the terms are right.  That is why so many people got wiped out in the sub-prime mortgage mess.  Someone convinced them they really could afford that great big house, they just had to get a loan with a Variable Rate mortgage.  Now that the rate has changed they can’t afford the payment, which means they couldn’t afford the house.

“For we brought nothing into this world, and it is certain we can carry nothing out. 8 And having food and clothing, with these we shall be content.”    I Timothy 6:7-8

The one thing that causes people to buy more stuff is a lack of contentment.  We just aren’t content with what we have. There is always something else that we ‘need’.  We keeping ‘needing’ things until we can’t pay our bills.  We aren’t the government so we eventually have to pay our bills.  The best way to make sure we can pay our bills is to spend less than we make and save the rest.

Unfortunately, what we see is that 61% of the families that use credit cards carry a balance from month to month, and the average balance is almost $10,000.  The amount of interest that these families are paying on the balance on credit cards is ridiculous.  These rates can go as high as 30%.  If the average family carrying $10,000 in credit card debt has to pay 30% interest, and they are making only minimum payments, it will take decades, not years, to pay of the debt.

Paul tells us in the book of Philippians that he had to learn to be content.  It doesn’t happen overnight, but just like trying to teach your puppy to sit or stay, we learn better with a treat.  Try living on less than you make for a single month.  I know that if you start saving and only buying things you can afford, you will learn to be content with what you have, and if you start spending cash instead of swiping a piece of plastic, I know you will make some changes. Trust me.  If you start laying down cold hard cash you will think twice about whether or not you really need that ‘thing’.

Hey everyone Paul here.  Just want to say Happy Friday!  Once again I have put together a list of articles from other personal finance bloggers I thought you might enjoy reading.

My Dollar Plan posted an article reviewing the Ohio 529 college plan.

Over at Cash Money Life, there is a very relevant article on Is Our Job Permanent?

Frugal Dad has a good article on Not allowing fear to guide our financial decisions.

Prime Time Money has a good article on Using 0% Balance Transfer credit cards.  This could be a good option for those of you working on paying off your debt.

Thanks to all of you for your continued support.  I am in this for the long haul.  All of you have a great weekend!

The Book of Proverbs has many great financial principles.  The second financial principle we want to look at in our series is ‘learning to save money’.  A lack of savings is the number one reason people go into debt.  They see something they want, they don’t have the money to pay for it, so they buy it on credit.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

How much are we saving?

In 2005, according to the Bureau of Economic Analysis the personal savings rate in the U.S was -0.5%.  That means that as Americans we spent more than we made.  There is good news however, according to government calculations, the savings rate for the last quarter of 2008 was 2.9%, which was up from 1.3% from the previous quarter.

“There is desirable treasure, And oil in the dwelling of the wise, But a foolish man squanders it.”    Proverbs 21:20

Are you wise or foolish?

If we use this verse from the book of Proverbs and apply it to the typical family we could come to no other conclusion than we are foolish.  The other negative impact on families that don’t save is the lessons that our children learn.  Unless we as parents are teaching our children how to save and manage money, we are setting them up to continue in the debt trap as they step out on their own.  Right now if you were to ask the freshman class at any college in the U.S. how they are paying for their degree, the overwhelming majority would say they will graduate with guaranteed student loans, but no guarantee of a job.  I can’t see anything desirable about that.

How do we teach people to save? Most people would like to save, but they just don’t seem to have any money left at the end of the month.  What can they do? Tomorrow we will look at the key to saving.

Today I will be starting a series dedicated to the seven Biblical principles of personal finance.  As a reminder I will list the principles and links back to the post for each principle as we tackle them.

1. Understand God’s Ownership (Psalms 24:1)
2. Learn to Save Money (Proverbs 21:20)
3. You Must Live on Less Than You Make (I Timothy 6:7-8)
4. There is Life After Debt (Proverbs 22:7)
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30)
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8)
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7)

The first principle reminds us that everything we have belongs to God.

“The earth is the Lord’s, and all its fullness, The world and those who dwell therein.”   Psalm 24:1

If you have ever read the Bible, you were reminded from Genesis to Revelation that God is the creator of everything. However, we sometimes forget that everything includes our money and the things we buy with our money.

Most families in the U.S. have bought into the idea that “we deserve” stuff.  After all, we work hard for the money we get, so we should have all the nice things that we want.  To a degree that is true, and I believe the Bible teaches us that God wants us to prosper, however, the Bible also teaches us that we are merely stewards of God’s resources.

As a steward we are not owners, but instead we are managers.  Because we often put ourselves in the place of the owner we take something that doesn’t belong to us, spend it in a way that is not pleasing to the rightful owner and then wonder why our lives are in a mess.  I believe that if we truly want to prosper the way the owner intends for us to prosper, we have to begin by being a better manager of His resources.

When I borrow something that belongs to a neighbor or a friend, I can’t treat it as if it were my own.  I shouldn’t toss it out, just because I no longer have a use for it.  I shouldn’t lend it out to someone else just because they need it.  When I am trusted to manage that which does not belong to me, I need to make sure each and everything I do with that item would be approved by the rightful owner.  In the area of personal finance that means we should be spending, saving and giving our money in a way the rightful owner would approve.  Over the next few days we will be looking at principles from the Bible that will help you better understand what the owner would have you do with His money.

What if you don’t believe in God? Well, this post is not a sermon on eternity, but I think the remainder of the posts in this series will still apply to you.  It is kind of like the Ten Commandments.  Even if you don’t believe in God, the Ten Commandments are still good things to live by.

What the Bible says about Personal Finance

In the New Testament, Jesus spoke more about money, possessions and stewardship than any other topic.  It isn’t because money is the most important thing in our lives, He spoke so much about it, because He wanted us to understand that if we could learn how to handle the pressure that money brings to the family, and channel that pressure into helping others we could be successful.

Jesus understood the dangers of materialism.  Today we are bombarded on a daily basis to get more stuff.  Even during this roller coaster economy, we are tempted to spend more than we make.  This ‘I want it now’ lifestyle was exactly what Jesus was trying to teach us to stay away from.

Biblical Financial Principles

I am going to start a series on seven Biblical Principles that will change the way you think about money. If you take time to read these posts I know they will help you better understand who God is and how He wants you to live your financial life.

1. Understand God’s Ownership (Psalms 24:1)“The earth is the Lord’s, and all its fullness, The world and those who dwell therein.”
2. Learn to Save Money (Proverbs 21:20) “There is desirable treasure, And oil in the dwelling of the wise, But a foolish man squanders it.”
3. You Must Live on Less Than You Make (I Timothy 6:7-8) “For we brought nothing into this world, and it is certain we can carry nothing out. 8 And having food and clothing,  with these we shall be content.”
4. There is Life After Debt (Proverbs 22:7) “The rich rules over the poor, And the borrower is servant to the lender.”
5. Establish an “On-Purpose” Cash Flow Plan (Luke 14:28-30) “For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it – 29 lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, 30 saying, ‘This man began to build and was not able to finish.’ ”
6. Prioritize Your Plan Around the Four Walls (I Timothy 5:8) “But if anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.”
7. Giving is the Goal to Financial Freedom (II Corinthians 9:7) “So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver.”

In the upcoming days and week ahead, I will be talking about each item in an individual post.  Thanks to all of you who continue to read and support this blog.

I am currently reading Rich Dad, Poor Dad, written by Robert Kiyosaki.  Although I don’t agree with a lot of things that Kiyosaki writes in the book, it is a somewhat motivational book.  One of the things he mentions is that a little greed can be a good thing when used as a motivator.

When I first read that idea, I thought he was off his rocker, but after stopping and re-reading that portion of the book, I can see some value in that idea.  Kiyosaki says that when he finds something that he wants, he looks for motivation to create additional income so that he can acquire the item; often the motivation is greed.

As I said, there are a lot of things I don’t agree with in this book, but using motivation to achieve success is one area that I do agree with.  However, I believe there are better things to use as motivation than greed. Here are just a few things that I came up with:

• The motivation for getting out of debt could be a better quality of life during retirement.

• The motivation for saving for your kids college would be not having them start their ‘adult’ life chained to a student loan.

• The motivation for saving for emergencies would be not having to worry about what would happen if you lost your job.

• The motivation for putting Long Term Care or Life Insurance in place would be to lessen the burden on your children or spouse

• The motivation to get your kids to buckle down in school could be a monetary reward for good grades (I know, I know, kids should want to get good grades just because. Right!)

Dave Ramsey’s Debt Snowball uses the idea of motivation to help keep you on track to becoming debt free.  A good motivational speaker will tell you to write down small attainable goals.  Motivation is at the heart of success.  Most people fail simply because they lose the motivation to continue.

What about you? What keeps you motivated? Leave a comment and let us know what your motivations are.

Happy Friday to you all!  Once again I have scoured the internet for some of the best articles written this week.  Enjoy!

Over at My Money Blog there is an interesting article on whether you should keep your Emergency Fund in your 401k.

Lazy Man and Money has a good article for those looking for a free budget spreadsheet.  Over 60 to choose from.

I don’t do a lot of talking about investing, so over at The Digerati Life there is a good article covering diversification.

If you want to see what 1% can do for you, head over to Get Rich Slowly and read the article on Compounding Interest.

Have a great weekend, and talk with you all on Monday.

I can speak from experience that when we complete our budget before the month begins, my wife and I both feel so much more confident that we are going to be successful that month. When we don’t get the budget done before the month begins there is always a little bit of fear that we are going to make a mistake. Fortunately, we are at the point where small mistakes aren’t going to impact us too much, but the extra stress is there just the same.

My suggestion is to be consistent each month and complete your budget before the month begins. Remember the budget should be “on-purpose and on paper”. This is the first step in winning in the area of personal finance.

After getting back from a vacation at Disneyworld I must tell you all that I don’t have alot of energy.  It was a great family vacation, but exhausting.  The tips below though, will not make you feel exhausted as you use them to try and save some money every month.

1.  Cut cell phone service down to minimum. Talk to your current provider about reducing your monthly minutes, or eliminating features you just don’t use that often.

2.  Consider dropping home telephone service. Just about the only people who call us these days are telemarketers. Most friends and family have cell phones and those that are “in network” can talk to us for free for an unlimited amount of time.  Even if you don’t cancel your home telephone service, you can probably save some by cutting back on extras like call waiting, caller ID, etc.  Since you are not using the land-line that much, you won’t miss the features.

3.  Raise car insurance deductibles if emergency fund in place.  If you have a solid emergency fund in place to easily cover deductibles, it might make sense to increase those deductibles on your auto insurance policy.  Raising deductibles from $250 to $1,000 can save you a few hundred dollars on insurance–just be sure you can afford that $1,000 in the event something bad happens.

4.  Reduce the temperature setting on your hot water heater. This one does require a little effort, especially if your water heater is in an out-of-the-way place.  Set the temperature to around 120 degrees.  You can count on about a 5 percent reduction on energy bills for each 10 degrees you drop the water.  While you are at it, consider a thermal blanket to insulate your water heater, particularly if it is stored in an uninsulated location that gets cold in the winter (garage, utility room, etc.).

5.  Run your ceiling fans in the winter. I know, it sounds crazy. By changing the blade direction on your ceiling fan to create an updraft, you can help recycle heat throughout a drafty room. Most fan models have a switch on the base of the unit that allows you to change direction.

6.  Use microwaves in the summer, and ovens in the winter.  During the dog days of summer, cranking up an oven can put an air conditioning system into overdrive.  However, in the winter the warmth of an oven can lessen the load of your heating system.  Your monthly utility bill will thank you.

7.  Divide credit card payments in half.  If you are already paying $100 a month on your credit card, half the amount and schedule two payments with the first coming about half way through the billing cycle.  Since interest is calculated using the card’s average daily balance, you’ll be reducing that balance earlier in the month by paying a little bit of the balance off, instead of waiting the full month to make a single payment.

9.  Disconnect electronic devices when not in use.The easiest way to do this is to plug devices into a single power strip and then unplugging the power strip when the items are not in use.  Electronic items continue to pull small amounts of power continuously even when powered down (this phenomenon is often referred to as “vampire power,” probably because it is sucking the life out of your finances!

10.  Improve your car’s gas mileage by replacing the air filter.  I know I said these would be effortless, but this one is so easy you can do it in less than five minutes.  Stop by a parts store and ask for a new air filter.  They will need to know your vehicle’s make, model, year and maybe the engine size (six-cylinder, eight-cylinder, etc.).  All this information should be listed in your owner’s manual, or on the inside of your driver’s side door panel.  Following the directions in your owner’s manual, which include locating the filter’s housing, removing a few screws, and swapping out filters, only take a few minutes of time.

11.  Use a drying rack for heavy linens. If you aren’t up for hanging a clothesline (or your neighborhood frowns on their use), consider buying  a simple drying rack to hang heavy towels and jeans over.  When the clothes are nearly dry, toss them in the dryer for a couple minutes with a fabric softening pad to freshen them up a bit and remove most of the wrinkles.

Saving money doesn’t have to be a chore, and in most cases requires very little (if any) investment up front. Give a few of these ideas a try, and feel free to add a few of your own ideas in the comments below.

Happy Friday to everyone!  I did not post much this week as I have been on vacation.  I am on vacation this week coming up as well.  Taking the family to Disney World in Florida.  There will be some posts next week, so keep coming back.

My Money Blog had a great article this week about how the average consumer spends their money.

Cash Money Life talked about having an Emergency Fund for Every Emergency.

Prime Time Money is talking about the $8,000 first time home buyer credit.

Fivecentnickel talks about Lifestyle Inflation.

Happy reading!