Money with a plan
So I am in an awesome ladies’ group where we get to fellowship, eat yummy food, make cool crafts, and learn about different topics. Some of the ladies expressed an interest in doing a talk about managing finances and budgeting. We didn’t have anyone to speak on the subject, so I volunteered. I am by no means a financial expert, not even close. I just have a LOT of experience on living without a plan for my money and know what that feels like. On the flip side, since we have gotten our financial house in better order I know what that feels like. A million times better. We ended up taking Dave Ramsey’s Financial Peace University class at church and it changed our whole lives. People throw that phrase around pretty easily sometimes. “It changed my life…” But I mean it. It was the difference between being able to save for our kid’s education or not. Allowing me to be a SAHM or not. Being on the same page with my spouse about our family’s future goals and plans or not. Pretty significant stuff. So I wanted to share a little bit of my story and highlights from the talk I gave. Do I have it all figured out? No. Do we still make mistakes with money and lost sight of our goals at times? Of course. That’s why I think stories like ours are even more important to share.
Money and finances. God equips us with many tools to use during our lives here on Earth. In Jeremiah 29:11 he tells us, “For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future.” He gives us these tools to help us to make the right choices in our lives, to reveal the perfect plan he has for us.
The most important tools among those that God gives us is himself, his son Jesus Christ and the Holy Spirit. He gives us a love letter, an instruction book for our lives through his word in the Bible. He gives us time each day to use as we see fit. We all get the same number of minutes but make our own choices about how it is spent. He places people in our paths that we can choose to fellowship with, help, be friend, and get to know. He gives each of us unique talents and gifts that make us special and truly one of a kind. Sometimes we can use these talents to earn a living. He has given us money to use as a tool to live our lives, support our families, and to demonstrate where our hearts really are. Matthew 6:21 tells us, “For where your treasure is, there your heart will be also.” All of these tools that God has given us require us to make choices, put forth effort and nurture different relationships. When one of these areas in your life is out of whack it knocks the other parts off center as well. If you only cleaned one area of your house, the other rooms would start to look crummy pretty fast.
God has all the wisdom in all eternity. Ever. He has chosen to include more than 2, 200 references to money and possessions in the Bible. He knows that money and finances can be a vehicle where we make good decisions and lead honest lives. He also knows that money is an area where in our choices we can fall short, make mistakes and miss his perfect plan for our lives. The mismanagement of our money can lead to incurring debt that we cannot pay back in our lifetime, trouble in our marriages and homes, stress and heartache. The current divorce rate in the United States is 46%. Financial problems are one of the most commonly given reasons for divorce. This strife over money is not typical because of one thing like a couple buying a house that was more than they could afford. It’s more like death by a thousand cuts, stopping at Starbucks every day, smoking, eating out more than we can afford, always buying the latest in technological devices, not talking to our spouse about money and having a plan for our lives. We can become a slave to our lifestyle, to our belongings, and all other areas of our life suffer because of it. People feel locked into the jobs they have just to keep on top of their bills, for all the “stuff” that they had to have and buy. Many have to go out and get second jobs. Who is running their households? Who is raising their children? It seems like an endless, viscous cycle. There is constant pressure to buy the latest and greatest. Pressure to have the most. What is more important to a child? Having a new cellphone or knowing their own parents? The choices that we make with our money say a lot about what we value. It is so important to listen to what God says about money, to talk to our spouses and develop a plan for our finances that will take our families where we want to go. Living life without a financial plan is like going on a road trip without a map. You’ll end up somewhere, but chances are it isn’t where you wanted to be.
In my own life relating to money and finances I can tell you interest in this topic is fairly new. I absolutely did not study finance in college and have never worked anywhere as an accountant, financial advisor or anything else close to that. My parents were very good with their money, but it was not something that we had long conversations about. I just knew we always had what we needed and that money always seemed to be there. Long story short, I am by no means an expert on money and finances. However, I do have a lot of life experience in living without a plan, making really stupid choices with my money and the stress and hardship this can cause. More importantly, I also have life experiences in living with a plan, making choices with my money that align with God’s word, and the satisfaction that comes in having good communication with my spouse about our family’s goals, meeting those goals, and seeing a brighter future for our children.
When I was a new college graduate I was earning $30,000 a year. When you go from $0 to $30,000 a year that’s a pretty hefty raise. Of course I celebrated my raise with new work clothes, stuff for my teaching job, things to decorate my new apartment, dinners and nights out with friends…You get the idea. I most certainly didn’t have a plan, and honestly I thought that if I could just pay the minimums on my credit cards each month I was living within my means. Of course as it always seems to in life, I had a few things happen at the same time that were difficult. I ended a long relationship which was a very good thing, moved to a new apartment where they soon raised my rent to an amount I could no longer afford, my car broke down, and I made several big purchases that were not anything extravagant by any means, but were more than what I could afford. For the first time in my life the amount that I owed on my credit card was more than what I had in the bank. It made me uncomfortable, but not as much as it should have. I continued to eat out, charge things I didn’t really need and basically just live beyond my means. In the midst of all of this, I met an extremely handsome, intelligent man that I liked immediately, more each time that I saw him. But he was going into the Army and I had said I would never marry someone in the military. I kept waiting for him to screw things up so I didn’t have to call him anymore.
So a little over two years later, after our wedding, we found ourselves in the same predicament as a couple that I had found myself in as a single person. We were consistently living beyond our means because we were living without a plan. We did not drive fancy cars, wear designer clothes or go on expensive vacations. But because we were not keeping track of what was coming in and where it was going, money and finances were a stressful part of our lives. Like before, this made us uncomfortable, but not enough to make real change. We would make budgets, but they seemed too difficult to follow, we had a hard time stopping the activities that we enjoyed like eating out to save money. It wasn’t until we were ready to make some real changes about the way that we thought about money that things began to turn around for us. Not accidentally, a lot of these changes came at a time when we were also trying seek God more in our marriage and family. It seemed as we did so, our hearts changed about what was important. It became important to us to get rid of our debts, be more mindful of how we spent our money, and have a plan for our lives that would get us to where we wanted to be. Where we wanted our kids to be.
We had become comfortable carrying quite a bit of debt. A lot of it was completely unnecessary, and looking back, I can’t believe that we made those choices. We would finance things at the store that we could have paid cash for because it was “free money.” We couldn’t pass up on such a good “deal.” The problem is that spending money you don’t have is painless. It’s so easy to swipe a credit card and worry about it later. Taking money out of your wallet, counting out the correct amount, handing it over and knowing you’ll never see it again makes you think.
We did a lot of different things to save money, used coupons, followed sales at the stores, bought things off Craigslist and thrift stores, swapped childcare with friends, and got crafty to make things we already owned work instead of buying new. I think the most important step came with taking FPU, when we switched to the envelope system. Basically, for groceries, gas, dining out, personal care (haircuts, etc…), and a small miscellaneous amount each month we have a set envelope full of cash. We agreed upon the amount as a couple. When the cash in the envelope is gone, we don’t spend any more money on that item. It can be painful at times (our “dining out” envelope seems to always be empty), but really puts a sharp focus on where your money is going. If you prefer to use debit cards to carrying cash, there are a ton of apps that have a digital version of the “envelope system” that can keep track of where your money is going.
As I said, the most pivotal moment in our family’s financial course was me taking Dave Ramsey’s Financial Peace University class during my husband’s second deployment. There was someone on the stage who used real words when talking about money that I could actually understand! He didn’t make me feel stupid, and he wasn’t afraid to share his own mistakes and what he’s learned from them. His lessons were also based in scripture, which made a huge difference to me. This wasn’t one important guy’s opinions about money. This was THE most important guy’s words about money, and how he wants us to live our lives.
One of the most important parts of the class are the seven baby steps that give you a systematic approach to dealing with your money. The steps are the following:
Baby Step 1
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.
Baby Step 2
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first.
Baby Step 3
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund.
Baby Step 4
Baby Step 5
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now.
Baby Step 6
Baby Step 7
We had never had an emergency fund before. It is amazing how it feels to have that security. Suddenly, there aren’t many financial “emergencies” in life anymore. Things still happen, but we don’t have to panic because we have a way to pay for them. We have paid off more than $106,350 in debt and are finally debt free except for some land that we own in West Virginia (that’s another story!). It can be done! Don’t say you can’t do something because your circumstances aren’t exactly the same as someone else’s. What can you do within the circumstances that you have?
The baby steps can be thought of as a great “big picture” idea when it comes to your family’s finances. But just as important are the day-to-day decisions that we make with our money. Budgets can seem like a bad word, it makes us reluctant when we feel like something is going to limit us or take away our options. But a good working budget actually does the opposite. We decide what our priorities are, and then make our money work for us. A lot of times, people will feel like they have more money once they have an actual working budget. Their money is going where they tell it to instead of just going. It’s important that both partners are on the same page when doing the budget, otherwise one will just make the budget, and the other will feel they have no say and rebel. Then the first person is mad because they think the other person doesn’t care, and the second person is mad because they think their spouse doesn’t value their input. Everyone needs to have a say, and everyone’s say is equally important. Take some time to track your expenses for a week if you’ve never done so and see what your spending looks like on paper. Then you can work on a quickie budget. Check on-line for some budget forms you like (www.daveramsey.com is great), or use some software that you like. There are suggested percentages for each category in a budget that are great guides and should let you know what being on track looks like for your income. After some time of living with the quickie budget, you can work on an extended budget. Nothing is written in stone, so if you want to make changes, do it. If you don’t like the budget on paper, you aren’t going to follow it.
Another part of the budget is charitable giving, titheing. Giving 10% of what we are blessed with back to God is an act of faith. It seems like a lot, but God tells us if we complete this act of obedience we will be flooded with more blessings than what we have given up. “I am the Lord All-Powerful, and I challenge you to put me to the test. Bring the entire ten percent into the storehouse, so there will be food in my hose. Then I will open the windows of heaven and flood you with blessing after blessing.” (Malachi 3:10 CEV)
The last thing I want to stress is that if you are making a change in the financial part of your lives and it feels like more than you can manage, or like there is no way you can get out from under the debt you may have, or if finances have always been a part of your marriage that has caused stress or heartache, go in prayer to God and ask for help and guidance. There is no problem to big for him and even if we can’t do it on our own, we can do it with him. I heard a quote at church last week that was awesome and I’ll end with it today. “I can’t do it without God, but God won’t do it without me.”