Managing Money God’s Way

It has been said that nearly half of American workers are living paycheck to paycheck.  Combine this with the news in recent months of housing foreclosures, late payments on credit cards, and other types of loans and it is easy to see why so many Americans are struggling with their financial lives.

What is Living Paycheck to Paycheck?

I am not sure if there is a true definition of “living paycheck to paycheck”, but I know I have been there myself.  If I can sum it up by example, it is the day before payday and I am breathing a sigh of relief after logging on to check my balance in my checking account (first time in 2 weeks) and realize that I am not overdrawn, and there is still a few bucks in the account.

The Statistics

• 70% of people in North America live paycheck to paycheck.
  - The Wall Street Journal
• 17% of Americans do not have enough savings to cover 1 week without a paycheck. 55% could not live for 3 months or less without a paycheck.
  - USA Today
• The estimated average credit-card debt per US card-holding households in 2005 was $9,312.
  - Time Magazine
• The personal savings rate in the US has now fallen to -2.2% — the lowest in 60 years.
  - The Department of Commerce

The numbers tell all.  Most of us spend everything we make each month.  In fact we spend more than we make, because we carry a balance on our credit cards.  I imagine a large percentage of us could save something every month if we just cut back on our lifestyle.

Save Something, Anything

I used to fall into the category of saving nothing because the amount of money I had left over at the end of every month was so small I thought it would not make a difference.  How wrong I was!  Even $20 a month adds up over time.  In just a few short months you could build up a $100 cushion in your emergency fund.  Here are a couple of ideas to get you started on the road to saving:

1. Find one or two monthly expenses you can live without and get rid of them.
2. Open a high-yield savings account.
3. Set up automatic transfers each month in the amount you saved by reducing your monthly expenses.
4. Earn extra money (work part-time, start a blog, etc.)

The point I am trying to make is to start saving something.  Saving nothing this month leaves you right where you started, living paycheck to paycheck.

Another Happy Friday to you all!  Here are some great reads from other personal finance blogs.  Enjoy!

The Digerati Life had a great article this week about Time is Money.  I commented that I wished they had also broke it down by income level.

Prime Time Money had a good article on Clean Finances, Clean Mind.  Kind of reminds me of the Getting Things Done.  Get down on paper what you need to do with your finances, start working on it and it clears your mind of those tasks.

Christian Money Mountain talked about step 3 of the Dave Ramsey plan, Save 3 to 6 months of living expenses.

Debt Free Adventure talks about how to save money on groceries.

I just want to let everyone know I will be going on vacation but don’t fret, I will still be posting as much as I can.  So keep coming back!

Some Warren Buffet wisdom I came across, with my comments added.  Enjoy!

Reinvest your profits – this is the only way to take advantage of compound growth, which is money growing on money.

Be willing to be different – you follow the herd, you’re gonna get hurt. Going against the herd may be scary, but can pay off if done properly.

Never suck your thumb – If you find something good, act. Don’t sit around doing nothing.

Spell out the deal before you start – Get all the details in writing before you follow through.

Watch small expenses – The article mentions a guy who counted 500-sheet rolls of toilet paper to make sure he wasn’t being ripped off. That seems a bit extreme to me but I see the point of not wasting money.
Limit what you borrow – I believe that the only acceptable forms of debt are student loans, car loans (reasonable car loans), mortgages, and possible 0% deals that may pop up every once in a while. Now, don’t mistake that sentence to mean that I think it’s okay to have debt—that’s not what I’m saying. The main thing is to use debt as a tool and use it wisely.

Be persistent – Always remember the saying: “If at first you don’t succeed, try, try again.”

Know when to quit – You have to know when to say, “when.”

Assess the risks – Do some worst-case-scenario analysis before you proceed. In other words, count the costs before you begin.

Know what success really means – I love the fact that Buffett is not on an ego trip with his giving. According to the article, Buffett does not want any buildings named after him. That’s soooooo cool! I really respect that about him.

I am a huge advocate of financial education.  I am still in the learning mode.  I try to learn something new everyday about personal finances.  Now I am not saying that it is NOT the parents responsibility to teach their kids about finances (I think they should).  But what about if they have it all wrong?  We should have individuals well versed in personal finance teach the following 8 subjects in school:

1. Credit Cards
2. How to Budget
3. Importance of Saving and starting young
4. The Meaning of Frugality
5. How to Invest
6. Basics of Real Estate
7. Retirement Issues
8. Entrepreneurship

The last one is especially important in my book.  Why?  Because what we teach our kids in school right now is how to enter the rat race and stay their entire lives making someone else wealthy.

I must admit, I used to struggle with budgeting.  I mean it was always a pain to figure out what categories to use in a budget, how much to budget for each category, and manage to the budget.

What I tried at first was Microsoft Money and their built in budget tool.  I did not care for it, as it was difficult to use, difficult to manage, and it never seemed to work for us.  We were never able to stay within budget.  Then I tried a basic Excel spreadsheet.  This was easier to use, but still I could never manage to our budget and we always struggled.

Budget Failures

The reason we always failed at creating and managing a budget I think were two fold.

1. I really hate to budget.  Makes me feel like I am limiting myself with my money.  I like to now call what I do a spending plan.  My wife and I give every dollar we make a job.
2. Managing to a budget was difficult because even though we budgeted a certain amount for instance eating out, we never knew how much we had left to spend.

Spending Plan Success

What we have switched to that works for us is a spending plan.  For the plan we use a great spreadsheet that you can find over at It’s Your Money.  It is an envelope spreadsheet.  Why it is perfect for us is you are able to allocate funds into a virtual envelope and as you spend money in that category it reduces the envelope by that amount so you always know how much you have left to spend.  If you overspend, you must borrow funds from another envelope to make up the negative.  That way, you can never spend more than you have (as long as you stay on top of managing the envelope system).

So if you are looking for a better way to budget, give this a try!

I am writing today to start what will probably be a 3 part series on budgeting.  I was inspired to write this series by one of the comments I received the other day from JoAnn.  She writes “Can you teach an old dog new tricks? I am retiring soon – will be 65 in a few months – have never in my life done a budget. I’m not sure I even know how.  I will be living on 30% less income. I would like to see on this page, how to make a budget.”  So today I start out with what I am calling “First Steps”.

Finances are one of the most difficult challenges that many of us face during our lives.  It is no surprise (or maybe I should say it SHOULDN’T be a surprise) that the challenges double when we get married.  There is no one way to create a budget and there is no definite key to financial success.  The best thing that we can do is be good stewards over what we have – what ever that means for each of us.

1. Keep up with what you are spending.  It doesn’t matter how much money you have you need a record of what you are spending.  Write down every thing that you spend each month and then look at ways you can improve on that spending or make cuts.
2. Pray over your finances.  This is not about asking for more but about asking for guidance over each penny that you spend. Talking to God about how you are utilizing your talents (money) will help you stay focused on doing the best with what you have.
3. Give freely.  It really is true that you can’t out give God.  When you talk to Him about your finances see what He leads you to give to others.  I’ve given away ear rings, dishes, food, time, and plants.  Tithing is important, but giving freely and joyfully of all that we are stewards over is just as important.

Getting your finances in order does not happen over night.  You have to be willing to change, mold and tweak your spending and income so that you can the financial challenges that are facing your life.

Not everyone makes a salary.  Many people live paycheck to paycheck and week to week.  It can be difficult trying to set up a budget when the money is coming in by the week and going out by the month.  Here are a few tips.

• Write down a list of all the payments that you make and the date that each payment is due.

• Put the payments together in equal (or close to it) amounts.

1. Car payment ($450), credit card ($75) and water bill ($75)
2. Mortgage ($650)
3. Electric ($250), Cable ($100), Phones ($200)

• Be sure that each group is scheduled before the due date of the bills. It is okay if the payments go out before the due date but NEVER pay late.

• Make the payments as soon as you get the paycheck, before anything else comes out. One of the reason people struggle to make monthly payments on weekly paychecks is that it is hard to set aside the money to make those payments. This skips that step.

• Save at least a portion of any amount that is left over.

Creating a budget for a weekly paycheck can be painless if you schedule out your payments in equal allotments so that the money can go where it is needed before it manages to go somewhere else.

Let’s all pitch in and help JoAnn.  What tips do you have for creating a budget?  What have you found that works best?  What spreadsheet or software do you use to help with your budget?

Today being Friday I thought I would give you all some links to things being talked about at other financial blogs.  Happy Reading!

Over at Lazy Man and Money I read a great article on Estate Planning:  Are you ready when your time comes?

Cash Money Life wrote an article this week explaining the Cash for Clunkers Program run by the government.  I liked this one because it gave you the sites you could go to to figure out if your car qualified (after the change in rules of course).

Frugal Dad came out with a good article this morning on Where to Save your Kids Birthday Money.  Gave me some good tips since we are usually pretty bad about making our kids save any of their birthday money.

J.D. over at Get Rich Slowly has a write up on What we wish we knew when we were younger.  Man, where was this write up when I was like 18?

Hope everyone has a great weekend!  See you again on Monday.

Just the other day my wife was visiting her step dad and working with him to get on his checking account to help him out with things and she was not able to.  Come to find out there was a collection account that she got dinged for.  She got dinged for this by helping her real father out with his checking account.  It is a good idea to check not only your own credit report at least once a year, but your spouses as well.  We found that out the hard way.

Skeletons In Your Credit Closet?

Often times consumers have legitimate, negative blemishes on their credit history that are being accurately reflected in their credit file.  For these types of items there isn’t much you can do, but wait.  The earliest most accurate, negative information can be removed from your credit file is seven years.  However, if you are like me, and find an inaccuracy in your report is dragging down your FICO score, there is something you can do about it.  You can dispute the item at all three credit reporting agencies.  Here a few steps to take to resolve inaccurate information being reported on your credit report.

Steps to Resolving Credit Report Errors

Contact creditor and notify them of the inaccuracy.  Creditors reporting data to credit reports have the ability to wipe clean inaccuracies in your file by submitting what’s called a Universal Data Form (or U-Data Form).  Ask for the creditor to correct their records, update your data with all three major credit reporting agencies, and notify you in writing when the process is complete.  Creditors update credit bureau files every month, or every quarter, and if you don’t notify them of the inaccuracy it could wind up right back on your credit file weeks after getting it resolved through the credit bureau.

Write a letter to the credit reporting agency.  In the letter, identify the account that is reporting inaccurately, give a brief explanation why you believe the record is incorrect, and sign and date the letter.  Be sure to include a copy of any relevant documentation you have from the creditor indicating this was a mistake.

Time is on your side.  According to the federal Fair Credit Reporting Act, credit bureaus have 30 days to remove the record from your file, or provide you proof that the account is reporting correctly.  Occasionally, creditors or reporting agencies miss this window and the information has to be removed, but if it is legitimately being reported by the creditor often times it will reappear.  This strategy is commonly used by these “credit repair agencies” that are usually nothing more than a scam disguised as a legitimate service.  If you legitimately owed a debt, and were late paying on that debt, then there is nothing you can do to have it removed from your record, other than wait the required period of time.

Send correspondence via certified mail, return receipt requested.  The 30-day ticker starts when the bureau receives your letter, and the signed receipt is your proof that is was delivered.  Be sure to stash it in a safe location while waiting to hear back from the credit bureaus.

Today I want to look at budgeting in a different way.  I know for me, when the word budget is brought up all I can think of is “BORING”.  I hate to budget.  I hate to have to sit through trying to figure out a budget that is actually going to work.  Do you feel the same way?  So, let’s look at it in a different way.

A Money Plan

Simply stated, budgeting is a money plan.  You are figuring out how you are going to spend your income for the month.  When I look at it as a spending plan, I get a little more excited about it.  If you think about it, failing to put a spending plan together is planning to fail.  Fail at overspending, spending on the wrong things, not saving any money, not paying down debt.

Your spending plan is your roadmap on how you are going to get from debt slave to debt free!

Don’t worry if you do not totally understand where I am going with all of this just yet.  Future posts will fill in the gaps.

I wanted to take the opportunity to talk to those of you who are reading this blog.  I have been blogging for about 1 month now and I want to get some feedback from you.  I hope you will take the time to respond.  I really want to hear from all of you about what you would like to see on this blog.  So, bring on the comments!

What topics should be discussed here?

What do you like about the layout of this blog?

What would you change about the layout of this blog?

I will use these suggestions to improve the site and write about the topics you want to hear about.

Thanks again for your responses!