Managing Money God’s Way

Have you ever been driving down the road looking for a street you need to turn on and somehow miss the signpost?  It has happened to me many times.  But what does that have to do with financial freedom?  If you are not looking for the signpost, you will miss the turn-off.

Financial freedom can be defined many different ways.  The definition I will use is:  True Financial Freedom is freedom from the bondage of debts, oppression of others, envy, greed, or resentfulness.  So how can we achieve true financial freedom?  By understanding how God uses money in our lives.

How God Uses Money in Our Lives

• He demonstrates His faithfulness. – Lamentations 3:22
• He reveals our need for Jesus. – Galatians 5:19-21
• He stimulates our prayer lives. – Matthew 7:7-8
• He cultivates self-control in our lives. – Galatians 5:22-23
• He clarifies life values:  God first; others before self(eternal vs. earthly). – Matthew 6:21
• He teaches cooperation and communication in:
  • Marriage – Genesis 2:24
  • Through accountability – Proverbs 27:17
• He provides direction and timing in our lives: (Hebrews 13:20-21; Matthew 25:1-13)
• Through supply – Philippians 4:19
• Through withholding – Galatians 6:9

Tomorrow, I will talk about some of the behaviors for the financially free.

In my previous post on Friday, I talked about being in financial bondage.  In that post, I stated that financial bondage is “the state of being captivated or overwhelmed by money matters, including mental or spiritual concerns.  In today’s post I want to share with you what I feel are the 9 symptoms of financial bondage.  If you have one or more of these symptoms, you more than likely are in financial bondage.  All the verses I quote below are from the New International Version.

9 Symptoms of Financial Bondage

• You have a Get rich quick attitude.  Proverbs 28:22 – “A stingy man is eager to get rich and is unaware that poverty awaits him.”  You know who you are.  You are out buying lottery tickets, or looking up every get rich quick scheme you can find on the internet.
• Overdue bills, late fees.  Proverbs 3:27-28 – “Do not withhold good from those who deserve it, when it is in your power to act.  Do not say to your neighbor, “Come back later; I’ll give it tomorrow”-when you now have it with you.”  Paying your credit cards late?  Incurring late payment fee’s?
• Making minimum payments, over-limit fees.  I would say this one is ok if you are working on paying off your debt utilizing the debt snowball method, because you are paying more than the minimum of something to get it payed off.
• Cash advance on one credit card to pay the payment on another.
• Worry, envy, resentment, bitterness, pride, rebellion.  Hebrews 12:15 – “See to it that no one misses the grace of God and that no bitter root grows up to cause trouble and defile many.”
• Conflict in relationships.  Proverbs 15:16 – “Better a little with the dear of the LORD than great wealth with turmoil.”
• Lack of sharing.  Ecclesiastes 5:13 – “I have seen a grievous evil under the sun:  wealth hoarded to the harm of its owner.”
• Hasty decisions (not counting the costs; operating without a plan).  Proverbs 21:5 – “The plans of the diligent lead to profit as surely as haste leads to poverty.”
• Result:  unmet needs in the family; overcommitment to work; unplanned emergencies.  Proverbs 21:20 – “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.”

While writing this article I had to stop and think for a few moments, and come to the conclusion that I AM in financial bondage at this time.  My wife and I are working towards becoming debt free, but somethings have happened recently that have caused a few setbacks and have caused me to display some of these symptoms.

Please let me know if you have recently suffered from any of the above symptoms.  Keep coming back, as we work through this together!

Would you say you are in financial bondage or truly financially free?  Being in debt still, puts me in bondage.  Just how do I define financial bondage?  Financial bondage is the state of being captivated or overwhelmed by money matters, including mental or spiritual concerns.

Some American Financial Statistics

• Almost 1/2 spend more than they earn (52%)
• Bankruptcies are 4 times what they were 20 years ago.
• Money is the #1 cause of marital conflict.
• Average family credit card debt is greater than $9,500.
• Only 1/3 pay their credit cards off each month.
• 1/2 pay only the minimum balance each month.
• Average American uses an ATM every other day.
• 900+ Billion owed on credit cards.

So what do these statistics tell us?  That for most of us money is a big problem in our lives.  If I had to guess why, I would have to say that for the most part it is because of a lack of a solid financial education.  You see, we go through school having never been taught how to handle money.  According to Robert Kiyosaki his rich dad often said “Your banker never asks to see your report card.  A Banker does not care what your grades were.  A banker wants to see your financial statement.  Your financial statement is your report card once you leave school.”

This is just the start to a series of posts I am going to start that talk about and deal with various aspects of financial education.  I hope you will join me on the journey!

Today I celebrate my 26th Wedding Anniversary!  I will be taking the day off from posting to spend time with my wonderful wife!  Talk to you all tomorrow….

A while back I blogged about the need to start an emergency fund.  Well today I wanted to address the question of “How big of an emergency fund should I have?”

A well funded emergency fund is the foundation of any solid financial plan.  Having funds stashed away for rainy days puts some distance between you and the financial cliff you could fall over at any moment, usually the result of a broken appliance, car repairs, or major medical.  Most financial planners and books recommend that you have 3 to 6 months of living expenses saved in an emergency fund.  However, I have found that this 3 to 6 month rule does not fit everyone or every situation.

Emergency Savings – Baby Emergency Fund

Dave Ramsey’s 7 steps calls for a “baby emergency fund” of $1000 be put into a savings account as the first step to financial freedom.  This is the plan my wife and I have followed.  We have $1000 set aside in an emergency fund at ING Direct.  We did this because it is harder for us to get to the money, and we earn a high yield on the savings account.  Don’t forget, if you would like to open an account at ING Direct, please email with your name and email address and I will send you a link that will get $25 deposited into your account.

How Large Should Your Emergency Fund Be?

That all depends.  To me, there is no magic formula for calculating how much should be in your emergency fund.  I am comfortable with $1000 being in there right now, but I would like a larger emergency fund down the road.  So the formula my wife and I have come up with is the following:

• $500 per spouse
• $500 per child
• $1,000 from the initial funding of our “baby emergency fund”

Following this formula we arrived at the $3,000 amount for our family.  Since my wife works outside the home, if I became unemployed we would still have her income.

Fully-Funded Emergency Fund

Once you are completely debt free (a step we are still working on) I recommend an emergency fund of 6 months of living expenses.  For most famiies this would probably be around $10,000.  Remember, this money is to only be used to pay for basic expenses in an emergency.  Mortgages, car payments, groceries, water, electricity should be included in this calculation.  Your gym membership or cable/internet bill could be canceled or put on hold during this time.  To the wise investor $10,000 may sound like an exorbitant amount of cash to keep on the sidelines, but just imagine the peace of mind you will have knowing you have 6 months of expenses just sitting there in case of an emergency.

Agree/Disagree with me?  Please write and let me know.

One of the first things you will hear from anyone who is helping you with your finances is that you will need a budget. A budget is usually the difference between someone who has their finances under control (as long as they manage to their budget) and someone who doesn’t (like me right now). I have not been staying on top of my budget as of late, and it is coming back to haunt me. If you are like me and hate budgeting, I have a way to get it setup and done that will require about 10 to 15 minutes a week to maintain. This method utilizes the Keep It Simple Stupid principle. It is called Mint.

What You Will Need

1. A computer with internet access.
2. Access to online banking.
3. A Mint.com account.  It is free to signup.
4. A good 2 hours to get it setup.  Once it is setup it will only take 10 to 15 minutes a week to maintain.

Step 1 – Setup your account at Mint.com

Go to Mint.com, signup and begin the process of entering all of your accounts.  You are able to add checking, savings, mortgage, investment, and credit card accounts.  Some of your accounts may not have online access, but enter as many as you can.

Step 2 – Create your starting budget

Use either an excel spreadsheet or good old pen and paper to list your income and expenses.  I happen to use a spreadsheet available at Google Docs.  You can find it here.  So I plug all my budget numbers into the spreadsheet until I get things right.

Step 3 – Create your budget in Mint

Now you can go into Mint and create a budget to watch your spending categories.  This happens on the “Overview” page.  You will see your category names on the left and on the right will be the amounts you decided that you were going to put into each budget category.  You want to stay below this amount each month.

The black line in the middle shoes how far through the month you are with the date at the bottom.  The colored bars show what percentages of your budgets have been spent with the actual amount on the end.  Green means that you have spent less of a percentage than the percentage we are through the month (I.E. we are 50% through the month but I have spent less than 50% of the budget for that category).  Yellow means you have spent higher than the percentage you are through the month.  Finally, orange means you have overspent in that category.

Step 4 – Categorize items on Mint

This is the boring part.  You are going to go to the “Transactions” tab on Mint and put each transaction into a category that corresponds to your budget.  This will help you see where you are at with your budget categories.

Step 5 – Maintain the budget

You will need to go in at least each week and take a few minutes to clean up the transactions to make sure they go into the proper categories.  Now that I have this setup and going, it usually takes me about 10 minutes each week to do this.

When a budget category turns orange or gets close, STOP SPENDING! You need to be reviewing this with your spouse, because you both need to agree that when a category turns orange you are not going to spend anymore money.

If you stick to this it will make budgeting very easy and straight forward.  Trust me, I hate doing this budgeting stuff, but this has made it much easier and quicker for me to get through it.

Also, if you have an iPhone or iTouch, there is a great application that will help you track your Mint budget from whever you are.

Happy Budgeting!

I am trying out something new starting this week – Personal Finance Tip of The Week!

This weeks tip involves…Free Personal Finance Templates!

As you might already be aware of, Microsoft is no longer selling Microsoft Money and will end support sometime around January 31, 2011.  If you have been using Microsoft Money or some other priced Personal Finance software, maybe now might be the time to look for an alternative.  Manage your finances for FREE using Google Docs Personal Finances Templates!

I personally have been searching for months to find financial tracking software that works for me.  I have toyed around with several, but have yet to settle on a solution that is perfect for me.  There are a lot of great solutions out there… some are free, some are not.

A Few Software Solutions That Cost Money

• Mvelopes – Applies financial software technology to the traditional envelope method of budgeting and is a popular choice among PF Bloggers.  They offer a 14-day free trial and their prices are as follows: Quarterly = $39.60 ($13.20/mth) – 1 Yr = $129.60 $10.80/mth) – 2 Yr = $189.60 ($7.90/mth)
• Quicken – Touted as America’s #1 Personal Finance software, Quicken offers a variety of products ranging from $0 (online version) to $99 (business version).
• You Need A Budget - While this app is not free, they do offer a generous 60-day free trial; I know of at least a few PF Bloggers use this program to manage their finances.
• MoneyDance – Organize your finances, manage your budget, track your portfolio, or just automatically balance your checkbook

A Free Solution from Google Docs

I am not opposed to paying for software, but I am also not afraid to examine free tools to see if their offerings are sufficient for my needs.  There are a lot of useful templates Google Docs inventories, and I am currently testing several and am impressed so far.  I especially like the rating system, which allows me to see which templates have been more useful to more users without having to waste my time trying each one.

Currently Google Docs is offering three sections of Personal Finance templates.

Manage Your Expenses

This section mostly gives you a choice between Family Budgets or Personal Budgets, but also has several spreadsheet templates for Wedding Budgets and even offers a Home Improvement Spreadsheet.

Pay Off Your Debt

This section is currently offering payment calculators.  Specifically there is a Credit Card Payoff Calculator, a Mortgage Payoff Calculator, and a Simple Loan Calculator.

Grow Your Savings

This section offers several tools to help you get you manage and grow your savings account including registers, ledgers, & calculators.

What do I use?

As I mentioned above, I have not settled on my perfect solution as of yet, but to-date I use Microsoft Money for my checkbook needs.  I also use Excel for budgeting purposes.

Currently I have begun taking a serious look at using Google Docs Personal Finance Templates as a free solution to manage my affairs.

If you are looking for a free solution, Google Docs PF Templates has a strong offering that only stands to grow, expand, and improve as time goes on.  I will certainly report back and let you know what I have settled on once I decide!

Who do you blame for your financial problems?  One of the possible answers is “your parents.”  I wonder how many people really blame their parents for their financial problems.  I do believe parents play an important role in teaching life skills to their children, especially when the public or private education system does such a poor job of preparing students for the real world.  I personally do not blame my parents for my financial problems.  I am a willing and able adult that made my own poor choices.

Lack of Financial Education in Schools

When it comes to “real life” studies, there is a serious void in the education system in this nation.  We continue to teach kids to pass exams, to recite from memory, and to conform to so-called advances in teaching methods.  But I believe our children are being equipped with the wrong skills.  Don’t believe me?  When was the last time you used an algebraic expression to balance your checkbook, or calculus to solve your 1040 tax form?  What do your kids know about a 401k, Roth IRA, stocks, bonds, mutual funds, or credit cards?  I do beleive there is a place for those skills to be taught and that is in college, where it is required of students to indicate a path of studies that may require the knowledge of these higher levels of math and sciences.  For the rest of us, a basic introduction to personal finance topics would be helpful to prepare for the adult financial world.  Once they graduate, and many times before, students will be exposed to credit cards, lenders, car salesman and taxes if they work part time.

Poor Role Models in the Media

The media is full of poor financial role models.  Entertainers and sports celebrities who get paid ridiculous amounts of money and lead lavish lifestyles most of us could never afford.  As a society, we worship these people and further highlight their irresponsible behavior by portraying their lives as something we should all aspire to.

Accountability Crisis

We have an “accountability crisis” in this country.  People refuse to accept responsibility for their own actions.  The fault always belongs to someone else.  Don’t earn enough money?  “Poor man just can’t get ahead.”  Spending too much money?  “Well if the government would bring prices down!”  Can’t afford college?  “College is only for rich people.”  No one ever says, “I’m broke because I want to be.”  Or, “I can’t attend college because I am not willing to work for the money to pay for it.”  Imagine if we all took responsibility for our actions and our destiny and stopped pointing fingers.

So maybe our parents were not the best examples.  We have all made mistakes.  What separates you from serial failures is that you are willing to learn from those mistakes.  You are willing to work extra to dig yourself out of a financial hole.  You are willing to read books and magazines to learn about personal finance.  Quit waiting for someone else to save you, take responsibility for your financial decisions, and start making better ones to provide a better future for yourself and your family.

I would like to put “Easy” in the title of this post, but then I think we would be fooling ourselves.  The steps themselves are easy, but they are difficult to follow through on.  It will take determination, and a lot of sacrafice, to see all those credit card balances go to zero.  There is something I would like you to do before you begin to follow the steps below, and that is what I call Step Zero.  Identify why you want to be debt free.  Saying you want to be debt free is not enough, you need to know why.  For me, it is because debt is forcing me to stay in a job longer than I would like.  It is limiting my opportunities.  Once you have identified the “why” move on to the steps below.

Ten Steps to Paying Off Credit Card Debt

1. Save three months of expenses in an emergency fund.  You may be saying, “why is this on the list of steps to take to pay off my debt?”  You need this fund for when unexpected expenses come up, like when your air conditioner breaks, or your car breaks down.  This will keep you from using your credit cards to pay for this stuff.
2. Take an inventory of your debt.  In this step you list all of your credit card accounts.  Include the account number, current balance, interest rate, minimum payment, credit limit and contact number.  This may shock you when you see how much you really owe.
3. Contact each credit card’s customer service number.  What you are going to do here is explain that you are in the process of consolidating cards and would like them to review your account for a lower interest rate.  If they decline, ask to speak to a supervisor and repeat your pitch.  If that fails, thank them ad hang up.  Whatever you do, DO NOT close the account at this point.
4. Consolidate balances to credit cards with the lowest interest rate.  Move as much and as many of your high interest debt to cards with the lowest rates.
5. Get real angry.  I mean get really really angry and the debt staring back at you.  Take a look at it and remember all the nights it has kept you up, or all your dreams that have been put on hold.
6. Cut up all but the card with the highest available credit.  You are in a hole and you need to stop digging it deeper.  Get your scissors out and start cutting.  Take that card you kept with the highest available credit, put it in a plastic cup of water and freeze it.  You will only need it in case of an emergency.
7. Reorder your list of debts, putting the smallest debt at the top.  Put a big #1 next to that sucker.
8. Put every single dime you can find at debt #1.  You want every single extra penny you can scrape up to go to paying this debt off.
9. Snowball to the next smallest amount.  When the balance reaches zero and you have paid off the entire balance, you will then take the monthly minimum you were paying on that card along will every extra penny and begin to pay off the next credit card balance.  You will rinse and repeat this step until all your credit card balances are paid off.
10. Celebrate.  I think it is time to celebrate a great victory in your life.  Do something good for yourself.

If you are like me, you have probably been accumulating debt for years.  It is time to get it paid off and start living a life debt free!

I was sick this weekend so I had some time to contemplate about how our finances were doing, and I realized I was slipping back into some old bad habits.  I have been thinking about our finances lately, but not really wanting to dig to deep.

One thing I notice about this bad habit of mine is that the longer I put off entering transactions into my checkbook program and checking how we are doing against our budget, the harder it becomes to get caught up.  And I don’t mean because I have a lot of transactions to enter, I mean because I am afraid to look!

The difference now is that I can now recognize when this is happening to me and I will make time to make things right; to get caught up on balances, payments, etc.  I call this Budget Procrastination Syndrome or B.P.S. for short.

Symptoms of Budget Procrastination Syndrome

• Your last checking account entry is three weeks old.
• You are not quite sure when your next credit card payment is due.
• You feel a combination of anxiety and apathy towards doing anything financial.

Take it from me, the side effects of B.P.S. can be quite painful, ranging from missing a credit card payment and incurring a late fee, to bouncing a check.  So how can you over come B.P.S?

Home Remedies for Budget Procrastination Syndrome

The simplest cure for B.P.S. is to dive headfirst into your finances.  Try to set aside some time within the next 24 hours to get caught up with your finances.  Gather up your statements, update all outstanding balances in your checkbook and on your debt tracking sheet (you have one don’t you?).  Then start to look ahead at what bills are coming due and make sure you have enough cash on hand.

Sometimes we get so busy doing other things in life that managing our money gets relegated to the “I can do that tomorrow” pile.  Problem is, that tends to stay on that pile for quite a while.  If you feel yourself going down this road, I encourage you to make time today to get caught up.  You will feel a whole lot better if you know what is going on with your finances!