Christmas time – Already! Really?

Scriptures:  2 Cor 9:7,11; 1 Cor 13:3

Is your heart filled with joy at the sound of Christmas or dread because your budget will see red as a result of it? Is the Christmas season what you want it to be?  Do you want it to be something better? 

Everyone loves Christmas!  Yet there are those who dread it more than others.  For so many people, Christmas time comes with the obligation of gift-giving.   But is Christmas an obligation or simply a time to celebrate the birth of our Savior? 

I was able to bless someone this weekend with a new garbage disposal.  I bought and installed it and they were simply delighted and overjoyed because they were living without it for so long.  Being elderly, their income is fixed and didn’t want to call a plumber to replace it for fear of being taken advantage of.  And so it was a great way for me to bless this couple.

Because they wanted to pay for it themselves they were struggling when I paid for the disposal. So, I said it was my Christmas gift to them, thinking this would make it easier.  But the response I received was: “Doesn’t this mean I have to get you a gift now?”

Too often, Christmas time not only comes with the “obligation” of gift giving, but it is comes with the “liability” of giving a gift when you receive one.  What has happened to Christmas time when this is often the attitude of so many people.

A gift is something given to another person without any regard to receiving anything in return.  A gift should be given in love and not out of obligation.  And so is it a gift if you are giving to receive one in return?

There are lots of reasons why people feel this way, with pride being the main motivation.  They want to see themselves as maybe more giving than others.  And credit cards make that especially possible.  Then, in January, they feel the pain of having given so much that they feel the pain throughout the year only to exclaim, “What? It’s Christmas time again!”

So what can one do?  Is there any way of breaking through this attitude of obligation, reciprocity, and pride? Yes!

First, the next time you receive a gift from someone don’t reciprocate, simply thank the person.  This is so hard for so many people I know.  Wrestle with your pride as it fights with you to reciprocate. 

Second, never give a gift if it isn’t given in love; and definitely never if it’s given with the expectation of receiving one in return.  This can be hard too because your pride will want to take credit for having done so. 

And as I write this I ponder the incredible gift God the Father gave us in Christ Jesus.  His plan of salvation was given as a gift not expecting anything in return.  And this is when I start evaluating my attitude and find myself grateful for what I have received, especially since I know there is no way I could ever reciprocate. 

And isn’t it glorious when you fully comprehend what Paul said to the Ephesians when he wrote: “For by grace you have been saved through faith; and that not of yourselves, it is the gift of God; not as a result of works, so that no one may boast.” (My emphasis added.)

And so when we can give in this manner, with this kind of love, and with this kind of attitude then we are indeed able to give in the Christmas spirit.

Lastly, here are a few practical tips for buying gifts at Christmas time:

·         Set money aside as part of your budgeting process. This is an easy area of saving (remember that savings are nothing more than future spending) but is often overlooked because of wanting to spend money in other areas of your budget.

·         Spend according to what you have saved for gifts and no more. 

·         Consider making gifts for those you choose to bless.  If your budget is limited there are lots you can do if you are creative.  My brother-in-law is a master woodworker and he has made for me several beautiful pieces that I now have on display in my home and only for the cost of the wood.  And these gifts mean more to me because of all of the time he put into the project than if he bought something in a store.

·         Give a gift only when it can be given in love. Never give out of obligation or reciprocity.

In closing, I wish you and your family a wonderful and blessed Christmas as we rejoice in our Lord's birth. 

Are We There Yet?

Scriptures: Phil 4:11-13; 1 Tim 6:6-11; Prov 3:5-6

Have you ever felt that you will never reach your financial goals?  Maybe you have become impatient and opted to abandon your financial principles to get what you want now.  In either case, be assured there is still hope of accomplishing your financial goals. 

Patience (or should I say the lack thereof) is what fails us when we are striving for our goals.  We never seem to achieve what we are working towards as quickly as we would like.  We simply don’t like the definition of patience as long suffering.  And yet this is exactly what we are called to do in so many circumstances.

Our children in the back seat of a long car ride often remind us of being impatient.  They exclaim with annoying frequency; are we there yet?  I have spoken to so many adults who feel the same way when they look at their financial position. They exclaim; when are we ever going to achieve our financial goals?  It’s the same kind of impatience felt by the young ones sitting in the back seat of the car.

When you are feeling this kind of impatience it is usually because we are not content with our circumstances.  And it is usually your wants driving you more than your needs.  It is your wants that make you impatient with your situation and it is your wants that make you discontented. 

Thus my first point, which I have made in previous posts, is that we must learn to be content.  Yet, I don’t want to dwell on this point now because you are saying to yourself that you are content but isn’t there value in buying something on sale now, even though you don’t have all of the money on-hand to make the purchase?

And so the question is: Is it ever prudent to use credit payments to purchase an item you are saving for now when that item goes on sale at a time when you can’t pay cash (one of your core financial principles)?

And my answer is maybe, but first let me be clear: I am a very strong proponent of paying cash for all of my purchases, even if they are big dollar purchases. Yet there are times when it may be prudent to make a purchase by borrowing money to close the deal. 

But let me detour my discussion to play out the kids in the back seat analogy a bit more.  When you start hearing those voices in the back seat exclaiming are we there yet, your thoughts typically turn to the options you have.  Is there a short cut I can take to get where I am going faster?  You may be stuck in traffic and you start pondering alternate routes.  You look for an out. 

But deviating from your current course comes with risks.  There may have been lots of other folks who had the same idea as you and now there is a traffic jam on that route too.  In fact, it may even take longer because it was an alternative route and now you are becoming more aggravated because of your poor choice. 

If you can relate to this analogy, then let me say, there are always alternatives in how you pay for an item and all of them come with varying levels of risk and conditions.  Paying all cash is the least risky and paying all credit is the most risky. But is there a point along this spectrum that would suggest an acceptable set of risks and conditions that is financially prudent?

So here’s an example to help you understand some of these conditions. 

You have a great budget in place and have been saving $50/month for a sofa that you expect will cost $3000.  Given your budget and savings plan, you will have saved $3000 in 60 months or 5 years – okay, now you know why you need patience.  And as of this month you have saved $1400. 

It’s Sunday afternoon and you are reading the sales in the paper and see the sofa of your dreams. It was originally $3000 but now is only $2400, a 20% sales discount!  Wow!  You are so excited but your excitement is quickly tempered by the fact you are still $1000 short of this price. 

What to do?  Well, you start looking for those shortcuts, those alternative routes that will get you to your destination faster.  Your wants start making you impatient and so you consider that easy out, the credit card.  After all, you don’t carry a balance anymore and your credit line would allow you to make the purchase.  And you have demonstrated that you can save the $50/month and so you can just pay the credit card the money and have the sofa now.  Isn’t this a win-win for everyone? 

Now you have heard me say this more than once now and I will say it again – do the math. 

I have done this analysis using a spreadsheet and its financial functions. And here is what I have learned when I have played with the numbers.

Here are some additional assumptions:  18% interest rate on my credit card and no way can I pay more than $50/month as a minimum payment.

So right off the bat you can see that it will take you four months longer to pay off the balance on the credit card as compared to saving the money and paying full price.  This may be okay but I will use this as part of several criteria for making this decision later on.

Next you will see that a 20% sales discount will save you $600 off the price of the sofa and at 18% interest rate on the credit card and 24 months to pay off the balance, you would pay $198 in interest, making the total sofa costs $2598, which is the same as a 13% sales discount.

Bottom line: You would still save money on the purchase of this sofa even though it took you four more months to pay it all off. 

But this is indeed a slippery slope in that you allowed yourself to become a slave to the lender.  You gave up any option you had to cover any unexpected options by using that $50 to cover that emergency expense.  Yes, this would have delayed your overall savings plan and thus putting off satisfying your desire for a new sofa. And isn’t this a lesson to learn how to be content with what you have today? 

Okay, but you are still learning and you really what that new couch.  Are there any guidelines one can use in making this decision?

Here are some I came up while observing several scenarios in the spreadsheet I built for this example.

·         Twenty percent (20%) seems to be the minimum sales discount I would consider before using a credit card.  Note: This could be a smaller sales discount if using consumer credit offered by the retailer because it is usually much less than the 18% interest rate charged by credit card companies.  But be sure you know the interest rate before signing on the dotted-line.  Also watch out for interest-free rates for 12 months because if you don’t pay off the principal in that period of time, all of the interest fees are charged at that 13^th pay period and therefore no longer interest-free. 

·         If you need more than four additional months to pay off the loan (credit card or consumer loan) than it would if you saved the cash, then keep on saving.  In my example above it would take 24 months to pay off the credit card balance and only 20 months to save the money for a full price purchase.  My logic here is that items such as furniture go on sale at least quarterly – every three months.  If I have $3000 in the bank, it would be worth my while to wait at least three months to wait for a sale.  In this I would not only pay less for the sofa but also have $600 extra for some of those accessories that would look so nice with that new sofa.

·         Never pay more in total cost for an item as compared to paying cash.  No matter what kind of financing you are using, you should never pay more than the price of the non-sale item.  You will always have to pay interest on any money you borrow and so if the sale price plus interest is more than the non-sale price then don’t buy the item.  Why should you pay more for something if you don’t have to?  This is particularly true for depreciating assets, such as furniture. 

·         Lastly, look into the minimum payment rules for your credit card.  You should never charge so much that the minimum payment would exceed what you are saving today.  This should be obvious, but if your minimum payment on a $1000 credit card balance is $65 and all you have been saving is $50/month, then don’t charge the sofa because you will have to find $15/month in your budget to cover the difference. 

Indulging our desires can and does cost us money.  We should grow more tolerant of the “are we there yet” cries from our wants.  We should all learn to become more content in our daily lives. 

Yet, if we are having a weak moment, then at least apply these financial guidelines when making your decision to buy now instead of later.  It should never cost you more money in the long run to satisfy your inner self. 

Future Spending … Future Shock?

Scriptures: Matt 6:31-34; Numbers 8:24-25; Prov 6:6-8; Heb 13:5-6

The most frequently asked question for those entering retirement is:  Will I have enough money to live? Have I saved enough? Some might ask: Is retirement even in God’s plan?  Do I have a future shock waiting for me?

I was recently at one of those retirement planning seminars – you know the ones with the free dinner – and the topic was Social Security.  A somewhat surprising statistic discussed was that for a lot of people Social Security will make up 54% of their retirement income, with that income being the US median of $44,000 per year.

Another statistic was that most people only have about $25,000 saved toward retirement, with many people retiring with only $75,000 in savings.  This puts quite a few people more dependent on Social Security than they would like to be. 

Is living on Social Security right or wrong? I know for some, they would definitely not want to be dependent upon the government while others are just fine with it because they have paid into the system for years and expect a return in their retirement. I don’t plan on opposing or supporting the notion of Social Security in this article. I simply hope to address the issue of saving for retirement.

So, the issue is that most people start saving much too late for their retirement.  The cares of life overwhelm them and too often they find themselves living paycheck to paycheck.  They spend too much in the present, saving very little for future spending.  This may even be you.

While this sounds like a grim picture – and in many ways it is – you have to ask yourself, does God even expect me to retire?  Or are we expected to work up until the day we pass into His presence?

Well, when you look at Scripture, retirement was established for the Levites, God’s priests, and they began their retirement at age 50.  While this feels young by today’s standards, this was quite near the end of their lives. 

So you are saying to yourself that you’re right, I do have to work until I die.  Let me say not really.  When you consider the work of the Levites, it was the Lord’s work.  They set about doing God’s business and not their own.  So, let me suggest that this is exactly what we should be considering once we leave the secular workplace (if that’s where you are working now). 

Consider what kind of work you can do in your retirement years and will that pay any money or have you saved enough to simply volunteer your time. The amount of money you save over time may allow you to devote your time and energy to doing Kingdom work – and wouldn’t that we wonderful.

On Crown’s Money Map, the last milestone is completed when your retirement is fully funded, leaving you free to do the Lord’s work. Reaching this last milestone for some will come sooner rather than later in life because of prudent saving over their working careers.  

Now, let me come back to the question of how much money do you need saved for retirement?  Well, that all depends on several factors and far too many for me to cover here.  I would recommend that you seek out a Christian financial counselor for better understanding your needs and how that will line up with your desires.

Yet here are a few things to consider:

·         How healthy are you?  While Medicare medical insurance exists, it still costs $99/person/month.  For a retired couple this is almost $2400 per year.  And this doesn’t include what isn’t’ covered by the insurance plan, for example dental and vision or copays/deductibles.  These are all additional expenses that have to be planned for.

·         How long to you expect to live?  Did you know that when Social Security was initiated back in the 1930’s the life expectancy was 63 years old? And that you could start collecting your Social Security at age 62!  Yes, it was only expected that the government was going to support you on average for one year!  Yet today the life expectancy is more like 85 years!  (And not you know why Social Security is in so much trouble.)  Can you expect to live to 90?  Your expected life expectancy is a very important factor in determining how much you need for retirement.

·         Where you live determines how much tax you will pay.  Property taxes, sales taxes, income taxes, gasoline & heating oil taxes all add up very quickly.  I recently traveled to Vermont and learned that for the same house in Colorado, I would pay an additional $5000 per year in property taxes in Vermont.  That’s the equivalent of one year’s grocery bill at $400/month! 

·         Is your home paid for? No one should enter retirement with a mortgage.  Your financial priority should be to pay off your mortgage well before retirement.

·         How large is your home in the context of the utilities needed to keep it warm/cool? Utility cost can add up quickly.  And yet maybe you’re like me and you look forward to splitting wood and keeping the house warm in the winter with a large fireplace.  As much as I love this idea, I can always expect to be out there preparing for winter so I have to be sure I can cover the expense of heating my home.

·         Where do your children live?  Will you be traveling often to visit them and the grandchildren?  Travel, whether for vacation or simply family time, can add up quickly. How much do you expect to travel in retirement?

·         Do you expect to work at all in retirement?  Some people choose to work part-time to help keep the body moving.  If yes, then how much do you expect this will generate in income?

·         How much inflation will there be in the years to come with respect to the interest earned on your savings?  Ideally, you want to collect more interest on your savings than the rate of inflation of the consumer price index. 

·         Lastly, how much can I realistically expect to receive from Social Security given that the government can keep it solvent by the time I retire and through the end of my life? And I prefer the perspective represented in this question: How will my savings be supplemented by Social Security rather than how Social Security will supplement my savings.  Clearly, I have much more control in the context of the first question.

And there are many other questions you need to answer besides these in order to determine how much money you expect to spend each year and therefore estimate how much money you will need saved. 

In closing, it is clear that if you plan to retire you will need to have money saved, supplemented by any money you would receive from Social Security.  You should save as much as you can for as long as you can prior to retiring.  And in your retirement (from the secular workforce) consider working in God’s Kingdom in a way that you could never have done before.

Planning with Goals in Mind

Scriptures:  Proverbs 16:3, Proverbs 21:5, Genesis 41:34-36

People often ask me if their budget looks good, that is, is it sound and workable.  While I may be tempted to provide a simple and encouraging response, I first have to ask: What financial goals are you trying to achieve?  Are you trying to get out of debt or save for retirement?

Zig Ziglar is credited with saying: “If you aim at nothing, you will hit it every time.” I love this quote because it keeps before me the question: What am I aiming at; or if you will, what are my goals? 

A goal simply defined is an end toward which effort is directed.  It’s the finish line in a race. It’s the netted area at the end of a soccer field.  And so when you think about the runner or soccer player, all of their effort is directed toward crossing the finish line or getting the ball in the net. 

Isn’t this the same kind of effort we should have toward achieving the goal of our budget?  Yet too often we don’t have goals in mind when we put our budget together.  We leave out the most important element of our planning – the goal! 

Wayne Gretzky once said: “You miss 100% of the shots you don't take.”  For myself, the essence of this quote suggests to me that I won’t know that I can achieve something unless I take a shot at it.  How do I really know I can’t achieve something unless I try?  And if I don’t try, I will never know.  Yet too many of us don’t try. We don’t try to achieve our goals because we never establish any.

What should we be shooting for?  What should our financial goals be? 

Well, I would suggest this is both personal and yet basic.  Personal in the sense that everyone’s finances are their own. Their passions and interests in life are uniquely personal to them.  Yet goals can also be basic, established in common sense and God’s word. 

The driving force in Crown Financial Ministries plan is the milestones (goals) found in their Money Map.  Like the person driving down a road, there are milestones one will see as they head toward their destination.  So it is financially, there are milestones you can reach as you reach toward your goals.

Even Dave Ramsey speaks of these goals, but he calls them baby steps.  I like this word picture because who can’t take baby steps as an adult.  They are small and very achievable.  And each of these baby steps represents a goal.

Both Dave Ramsey and Crown have established a set of goals that a budget would be built to achieve.  And both are driven by the underlying principle that debt is bad!

Here are Crown’s milestones:

1.    Save $1000 for an emergency fund.

2.    Pay off credit card debt. Increase savings to one month’s living expenses.

3.    Pay off all consumer debt. Increase savings to three month’s living expenses.

4.    Begin saving for major purchases, retirement, and college education.

5.    Buy a home and begin investing. Begin paying down your mortgage.

6.    Home mortgage is paid off. Children’s education is funded.

7.    Retirement is funded.  You are free to volunteer time for the Lord.

Given this set of “basic” goals, you can now build a family budget. 

For example, let’s assume you have reached Milestone 1 and have $1000 saved for emergencies – Great! Now you need to set your goal to Milestone 2. Your budget now needs to be focused on paying off credit card debt and increasing your savings to one month’s living expenses.  Your budget needs to reflect a strategy to achieve this goal such as the debt snowball.  Armed with this budget, you are on the road to achieving this goal.

What I want you to do now is ask yourself: “What are the goals I am trying to achieve financially?”  And then: “Does my budget reflect the effort I am making toward achieving these goals?”

Lastly, if you don’t have goals, make them.  After all you miss 100% of the shots you don’t take.  And if you have goals, make sure you are making the effort, establishing strategies to achieve them by having a plan (budget).

I will close with my story about Milestone 6.  I had never given any thought to paying off my home mortgage early.  In fact, every time I refinanced my mortgage, I did so for another 30 years!  I was simply bought into the idea that I would have a mortgage for the long haul, if not my entire life. 

But one day, my wife and I attended a Sunday school class that suggested I could pay off my home mortgage in five years or less.  Given the fact that I had 29 years to go on my mortgage because I had just moved to Colorado, I thought this goal was nuts! Really, my mortgage was $150,000 and you are suggesting that I can pay that off in five years or less. 

Yet, I thought it a noble goal, one that I never accepted as possible.  Yes it was aggressive. Yes it seemed impossible.  But I made it our family goal.  We put a plan together that set us on a course to achieve this goal.  And most importantly, I believed we could do this as a family.

Did we achieve this goal?  Yes, in four years we had a new home and we paid cash for it!  While at first I thought it impossible, once I dismissed that thought and said it is possible, my thinking was freed to achieve the goal. 

When I reminisce about this achievement, I am reminded of the scene in Star Wars, when Luke is learning the ways of the force from Yoda on his home planet of Dagobah. 

Luke’s X-wing fighter sank into the swamp and Yoda suggests to him that he has the ability to lift the ship out of the swamp and move it to firm land.  Luke, doubtful, tries and for a moment begins to achieve his goal.  The ship starts to lift out of the water, but Luke loses concentration and the ship sinks back into the water.  Luke walks off in disappointment over his failure.

Yoda, the wise and powerful jedi master that he is, uses the force to lift the ship and transports it to solid ground.  As this was happening, R2D2 alerts Luke to the situation and he stares in amazement and disbelief as he exclaims, “I don’t believe it!”  To this Yoda says, “That is why you fail.”

Take away:  You have to have goals you believe are possible.  If not, you will fail.  Setting impossible goals are worthless.  They only disappoint and discourage. 

Yet goals you can believe are possible are powerful and encouraging.  Couple this with creative thinking and good planning; your goals will be achieved. 

God’s Financial Principles

Scriptures:  1 Chr 29:11-14; Luke 14:33; Matt 6:24 ;

As Christians we know about the tithe. But did you know that there are so many other financial principles spelled out in Scriptures?  If we are called to be obedient to God’s Word then knowing what His Word says beyond the tithe will bring you understanding that will yield peace and joy.     

The first and foremost principle that comes to my mind when I consider God’s financial principles is stewardship.  When you look this word up in the dictionary, you will read that stewardship is the office, duties, and obligations of a steward.  Now there are several definitions for the steward, but the one that applies the most in this context is a fiscal agent or if you will a fiscal manager.  As a fiscal manager, you are making decisions about how to use and to distribute the funds appropriated to you by its owner. 

If we are stewards of the money appropriated to us, then who is the owner?  Well, that’s very clear when you read 1 Chr 29:11-14 – God is.  God owns everything under the heavens and in the earth.  Nothing is ours.  And once we can truly internalize this principle, this truth, we will struggle with our finances. 

And while stewardship is the most important principle, it is also the hardest to live by.  After all, one of the first words of a young child is the word mine!  How clear is our sinful nature when you take this one word in the context of being a steward? A steward whose attitude drifts to being the owner of something that isn’t is guilty of stealing.  Is this a bit extreme?  I don’t think so. 

Stealing is serious accusation to make but isn’t that what God did when speaking about tithes and offerings in Malachi 3:7-11?  Why would it be considered stealing from God if was yours in the first place?  It’s simple: it’s not yours.  Giving a portion back to God is what He expects of us as stewards of His “stuff” and as we manage the financial resources He has appropriated to us. 

Once you are able to internalize your role as steward, an entirely new set of questions enters your mind as you seek to use the finances given to you.  For example: (Okay I have to say it) What would Jesus do?  Would He spend twice as much money on an item because it’s the biggest thing that’s happening or would He get by with the item that gets the job done at half the cost?   Yet, it isn’t so much this question that is the issue as the subsequent one: What could I do with the money I just saved on buying the less costly item?  Would I use it to buy a homeless person a lunch?  Would I use it to buy flowers for the widow living in the local nursing home?  Would I donate it to the local food bank so that they can buy food for the poor?  And so yes, being a steward is hard because we often don’t think this way. 

Now don’t get me wrong, I believe that God provides us with financial resources in such a way as to enjoy what He has given us.  Solomon wrote in Ecclesiastes 5:18-19 that God not only provides riches but also the ability to enjoy them. 

What I sense is wrong is enjoying things in the now at the expense of pain in the future.  What do I mean by this?  Well, we unfortunately to buy things on credit, things that maybe we wouldn’t buy if we only had cash in hand to spend.  Credit presumes on the future, presumes on the future grace of God and this is a very slippery slope to be on.  It just isn’t good stewardship. 

I’ve spent a lot of time on stewardship because it’s by far the most important of God’s financial principles, but are there others?  Yes and they are much easier to apply once you have accepted this stewardship principle. Here is a brief list of these principles and you can read about many of them in my previous blog posts.

·         Spend less than you earn – build a budget that meets your financial goals

·         Save money since you never know when an emergency will strike

·         Get out of debt as quickly as you can

·         Never cosign for another person’s debt

·         Seek counsel from others when making important financial decisions

·         Be honest and fair in all of your affairs

·         Strive for contentment with your circumstances

·         Give to the poor and less fortunate

·         And yes, tithe according to how God has blessed you

When you think and act according to these principles, you will discover a new peace as well; a peace and comfort that comes from God. And you will never want to go back to your old ways ever again. 

Leaky Budgets

Scriptures:  Luke 14:28-30; Prov 16:3; Prov 27:12

Having a budget is a great thing.  Living according to your budget can be hard.  Often they spring leaks.  Sometimes money seems to disappear and you’re not sure where it went.  Do you have a leaky budget? 

I have a queen-sized air mattress that my large male cat found to be tasty.  He chewed on it for a while leaving several holes in the corner.  Patching them has become an ordeal and what seems to be an exercise in futility.  But with diligence, perseverance, and a little ingenuity, I have patched all of the leaks.

Budgets too can spring leaks.  Spending a little extra in your food budget or while on vacation can often lead to spending more than you earn by the end of the month or year if you are not mindful to balance your spending between all of your budget categories.

Unlike the air mattress that can’t make air, credit makes it easy to “borrow air” to meet your current spending desires. But think about it, your spending should never exceed your income. Like the air mattress, there is only so much air. 

This is a very important principle and practice when living on a budget.  You have to monitor your spending for each of your budget categories and when you need to or choose to exceed what you have budgeted for a category, you must take money away from another category to compensate or balance your budget. 

One of the simplest – and maybe best – way to accomplish this is the envelop system.  The concept is you divide your income each pay period into envelopes labeled according to your budget categories. Then as you spend the money on say Food, you take the money out of the envelope marked Food to pay the grocer.  If when you are checking out and hear the cashier state you owe $157.39 and you only have $150 in your food envelope, you have two choices: either take a few items out of your grocery cart and have the cashier deduct them until you get below $150; or you take money from another envelope. 

Yes, it that simple in practice but very hard when you have grown accustomed to simply charging your grocery bill to a credit card.  With the credit card, these kinds of hard choices don’t have to be made, especially in front of the grocery cashier!

People on a tight budget will therefore add things up as they shop in the store.  I did this when I had to put myself on a very tight budget.  I carried the calculator and found it a challenge to see how accurately I was able to get my total to match what the cashier said I owed.  What I discovered was I have no idea what was taxable and what wasn’t and so I was always off by the amount of sales tax that was imposed.  Clearly a trap you can easily slip into when you need to pinch every penny of your income.

Today, there are electronic versions of the envelope system, one of which Crown Ministries offers: Mnvelopes^®. The people I know that use these kinds of systems all say that it has helped them get out of debt by living according to their budgets.

When you think about this, if you have written down a budget what good would it be if you never spent according to your budget?  It would be simply an academic exercise. The budget is the best way to achieve your financial goals.

I have heard Dave Ramsey state that “every dollar needs a name on it.”  What he is saying is that for every dollar you spend you know exactly which budget category (envelope) that dollar is coming from.  And if you will, if you are not pulling it from an envelope, you are ultimately recording it somewhere that you spent that dollar in that category.  Otherwise, how else would you know how much you spent it any one category.

Does this sound like a lot of work?  Yes!  But which would you prefer: living always from paycheck to paycheck, not having a penny in the bank; or spending some effort on ensuring that you spend according to your budget and meeting all of your financial goals?  I hope that it is the latter, so please make the effort to spend according to your budget – It’s worth it!

So, when you are living on a budget, find encouragement every time you achieve one of your financial goals.  Maybe it’s paying off a credit card balance or a student loan. Whatever the goal, rejoice in the hard work it took to accomplish this and be proud. 

Choosing to Spend

Scriptures:  Luke 14:28; John 13:29; 1 Cor 6:20

Spending often falls into two categories: discretionary and non-discretionary.  Yet do we place too much of our income into the non-discretionary category? How much money really is in each and how do we manage between these two categories?

When I looked this word discretionary up in the dictionary, I noticed that the base word is discreet and not discrete. While discrete is synonymous with distinct, discreet is synonymous with discern, from which we get the word discernment.  And so it is with discretionary, it is a decision left to our own discretion, our own judgment.

Our discretionary spending is the amount we choose to spend in a particular category, only dictated by our tastes and judgment.  We are not legally responsible to pay the amount, it is simply our choice to buy or not. Lots of items fall into this category.

On the other hand non-discretionary spending takes the choice out of our hands and therefore we are contractually or under the law to pay.  In this category there are very few items, specifically taxes and, I will say, the tithe.

But you might be tempted to say that your mortgage is a non-discretionary expense because you are contractually obligated to make a payment every month.  Didn’t you just say that non-discretionary expenses are contractual expenses?  Yes, I did but I will also say that it was first a discretionary decision to purchase the home in the first place!

Therefore, we have to be very careful with all of our decisions since we may be locking ourselves into an unmanageable, unsustainable financial situation.  For some, they have learned that their choice of home was a poor one financially and they found themselves either having to sell their home or have it foreclosed. Others just struggle month to month, barely having enough money to put food on the table or clothes on their backs.

Where you live is a discretionary choice. You can choose to live in a particular city, county, or state.  This not only determines the size and price of a home but it also determines how much state and local taxes you pay and so, to some extent, even your taxes have a discretionary component.  Many soon-to-be retirees often review the taxes they will pay in a particular area and then choose to buy a home in that area.

Taxes come in many forms but most us understand them to fall into three categories: income taxes, property taxes, and use or sales taxes.  When I moved from New Jersey to Colorado, I lowered my property tax bill from $8000 to $2000 per year for a comparable property & home.  I also lowered my state income taxes by at least two percentage points.  All this extra cash went a long way to paying off our home mortgage. 

Therefore, don’t feel like you are locked into a tax or mortgage situation because all of these are only partially non-discretionary expenses.  You have a choice of where you live and how large a home you live in.  Choose carefully and you will create a sustainable financial foundation for yourself. 

And yes, there are many ways you can legally reduce your income tax liability but I will leave this to the tax professionals.  But you may want to read my blog article, Six of One, Half a Dozen of Another, where I speak to the myth of losing your tax deduction when you pay off your home mortgage.

Bottom Line:

·         There is only one non-discretionary that goes without a choice or decision and that is the tithe.  If you are not tithing to your church please carefully and prayerfully decide how you will start doing so.  And while we are not bound to the law any longer but under grace, remember that the word tithe means a tenth. 

·         While taxes are mandatory, how much you pay in taxes is determined by where you live – choose wisely, especially those looking into retirement.

·         Contractual payments all begin as discretionary choice, first and foremost the decision to go into debt.  Make sure that the non-discretionary debt payment you are choosing to make yourself liable for is something you can sustain for the term of the contract.  Don’t bite off more than you can chew. 

Everything else is discretionary.  You choose to spend the money you are given according to all of your decisions, which are based upon needs and more likely wants. When you create your budget, be sure to know what is reasonable to spend in each category of your budget.  Spending 20% in a particular category may be considered excessive when compared to others.  See the article Benchmarking Your Budget. 

Finally, I will ask you to sincerely consider the price that was paid by our Lord for your salvation.  This has to be one of the most precious and costly discretionary expenses anyone has ever paid.  He didn’t have to do so but He did out of His deep love for us.  If you haven’t ever considered this, I urge you to do so today.  Your life will never be the same when you do.