Budget Talk

I had to realize that to obtain financial freedom I would have to live within my means and I couldn’t spend more than I make. Society, the actions of some friends and family and advertisers pressures us to live beyond our means or use borrowed money for normal living expenses. This is a bad idea because to consistently spend more than is earned is creating a miserable financial future. It can also make the status of your present financial situation difficult. If you spend less than you earn, you begin to walk the important steps toward financial stability.

A budget or spending plan takes discipline but needs and wants can be incorporated into your budget.

Needs. Needs are necessary purchases required for basic living expenses such as food, clothing, shelter, insurance and transportation. While we easily mistakes needs for wants, we have to learn how to discern true needs and admit wants. We still have the responsibility to budget our needs wisely. If I need a winter coat, I have to make a wise decision about the style and price of the coat. The coat must fit my budget.

Wants. It’s not wrong to have wants but the problem is we want too much, we want it too soon and we’re unhappy when we can’t have what we want. There is nothing wrong with wants but they should not take priority over needs. Be sure to treat yourself to wants but only if your budget allows it. You should save for wants, easy credit should not provide for your wants.

Dividing up the income

The first portion of our income belongs to God. We return a tenth of our income, the tithe, telling him we recognize that He owns everything we have. He is the owner and we are managers of what he has allotted us.

The second portion belongs to the government known as taxes.

The third portion which comes after tithe and taxes is the Net Spendable Income. This is the portion of the income from which we set aside a portion for savings and meet our expenses such as food, the mortgage or rent, transportation, etc.

This leaves us with the surplus portion. This is the portion we use to aggressively pay off debt. Once we achieve debt freedom we use this portion to do and buy more of the things we want. Our goal should be to maximize our surplus portion so we can give more to meet the needs of others, invest long term to build wealth, retire comfortably and fund as much of our kids college fund as possible. Even though this portion is surplus it should still be controlled with a spending plan.

Be thankful

In the spirit of this wonderful Thanksgiving season I wanted to remind myself and everyone else to be thankful. Are you in financial turmoil? Are you at the beginning, in the middle or near the end of paying off your debt or are you experiencing some financial success? Whichever category you are in, be thankful this thanksgiving season. It’s easy to get discouraged about how much debt we are facing or how much debt we have left to pay off but you can be encouraged that you are on the right track and you will win if you don’t quit.

Even if you find yourself discouraged and frustrated, take time to be thankful. 1 Thessalonians 5:18 encourages us “in every thing give thanks; for this is the will of God in Christ Jesus concerning you.” This passage is not telling us to give thanks for everything but give thanks in everything. We can be thankful that even though our finances may not be at the point we desire, God has a plan for good to come out of our distress. So while you’re working those long hours, cutting back on expenses, attacking your debt aggressively and changing your financial future, be thankful.

So whether your finances are in bad shape or good shape, take time this season to reflect and give thanks!

HAPPY THANKSGIVING!

The debt-free Christmas

Thanksgiving eve and it’s not the turkey on most people’s minds. It’s shopping, spending, buying gifts for friends and loved ones. It’s a wonderful thing if you are smart about it but it can haunt you for months, maybe years, if you dig a hole of debt to get those things. Just wanted to share a few ideas of how you can have a debt-free christmas and not get slapped in the face with big payments in January and the rest of 2009.

Write down a plan. I stress the importance of having a household spending plan so I’m also stressing the importance of writing down a christmas spending plan. First, you have to know how much money you can spend without tapping your savings, your tithe or giving and missing any necessary payments. In other words your household budget should stay in tact. A good way to handle christmas is take a little out of each paycheck through the year but if you haven’t done that you are about 11 months behind. So, write a short list of everyone you would like to buy a gift then decide how much you can spend on each person based on your “extra money” leftover after everything else has been fulfilled. If you look at your list and your money and there is only enough for one person; you buy for that one person and don’t feel guilty about it.

Stick to the plan. It almost goes without saying but I’ll say it anyway, sticking to the plan is crucial. The spending plan won’t work if you don’t work it. If you have a list of five people you can buy gifts and $150 to spend, only spend that $150. Take the list of the items you want to buy in the stores with you. If needed, take an accountability partner to keep you from spending more than planned. Another way to stick to the plan and avoid spending more is…

Only use cash. There is an emtional connection you have with cash that outweighs your connection with a small plastic card. If you go to a restaurant and give the waiter $50 in cash for your meal, you will feel the pain of it leaving your hand a lot more than using your visa. Do not use credit cards of any type. You should be paying those off and not using them anyway but you don’t want to buy cousin tommy a sweater that he wears two times and you spend six months paying it off. It just doesn’t make sense. If you think you will spend more in the store you can always shop online. However, a plan is still needed and you must not go over your spending plan limit, it’s easy to get carried away online as well. So be disciplined so you don’t bust up your budget.

Remember the reason. I think in all the hustle and bustle of the shopping, decorating and everything that comes along with enjoying the season we forget the real meaning of it. The real meaning of christmas is not exchanging gifts but its the fact that God our Father LOVED us so much he sent his son, Jesus and this season celebrates his birth. Jesus is the reason for the season. So, NO you don’t have to buy a gift if you are struggling or in a financial squeeze and just can’t afford it this year. Buying gifts is a good way to express your love and gratitude to someone else but not at the expense of damaging the future of your finances.

Annual credit report

I have talked to people that have been scared to pull their credit report from fear of what may be on it. Many times it’s not as bad as we think. They should be pulled so you can know who and how much you owe to begin the process of settling those old debts that will surely come back to haunt you one day. Another reason is to make sure no one has stolen your identity. You want to make sure you don’t have any open accounts that you know nothing about.

You can get a free credit report from each of the three nationwide consumer credit reporting companies once every twelve months. You can order them all at once but I prefer to get one every four months to keep track of any changes or new information. You will be able to get one from Experian, Transunion and Equifax.

Be mindful of other websites that offer “free credit reports.” You will be able to get a free report but you will need to leave your bank account information because you sign up for a free trial membership of a credit monitoring service. If you don’t cancel your membership within the trial window you are automatically enrolled for the monthly premium withdrawal.

Living on less

Living on less money than you make is an easy concept to grasp but for many people it’s hard to do. Most, naturally want to spend all the money they have in their possession. Think about it, when you were a kid and someone gave you five dollars, you didn’t automatically think “I should save a dollar, give a dollar and spend the rest.” Living on less than you make is like contentment, it’s a learned trait.  It’s not terribly difficult but it does take self-control and a willingness to mature.

This is why a personal spending plan is so important. When you learn to live on less you stay out of debt, you don’t spend unneccessary money and everything you do with your money is in connection with your long term goals. The house you want, the car you want, your child’s college fund and retirement are largely based on your acceptance to spend, save and give on the income that comes in each month.

Manage a spending plan. Whether your income is six figures or below the average household income, your money needs direction.

Don’t be complacent. Sometimes we don’t make enough money so do not accept the lie that you will never make more than you are making now. Pray for the faith, boldness and courage to get a plan together, work that plan and double your income in three to five years. Commit to the Lord whatever you do and your plans will succeed. (Proverbs 16:3)

Patience. When you start the process of adjusting your lifestyle such as selling the car to get rid of an ugly car note, moving down in living space or not using credit cards it will take a few months for it all to start working together. You may not see immediate results but stick to the plan and within a few months you’ll see the progress.

Get out of debt. Some of us make enough money, the problem is we have been living on more than we make for so long we haven’t seen the reward of our hard earned money.

Living on less than you make is one of the paths to achieving financial success. If you spend everything that comes in each month, you have nothing set aside for the unexpected. It doesn’t have to be something tragic or big, it could be a $200 car repair and because all money is spent it can cause a big financial mess for months to come. Don’t be normal, be strange; live on less.

Proverbs 21:20