Personal Finance

There Will Be An Emergency

Over the past month or so I've been pretty consumed (in thought as well as actually working to help) with the devastating floods that hit parts of West Virginia, including the area where I grew up.  When I first went there to take supplies our church collected and to volunteer to help people clean up I could not believe what I was seeing.  It looked just like a disaster scene out of a movie!  The destruction that the flood waters left behind was absolutely unbelievable.  As I processed what happened there, three things came to mind that are applicable to personal finance.  Two of them have to do with what you should do to prepare for a financial emergency and the other concerns being able to respond when disaster strikes.


The first thing that I thought about was an emergency fund.  I wondered how many people whose homes and cars were flooded had money set aside to help them get through this emergency situation.  Money is not the answer to everything, and it certainly is not going to solve every problem that these floods created, but it would definitely make going through something like this a little easier if there were several months of living expenses sitting in a savings account.  Having an emergency fund in place creates margin and allows you to deal with financial emergencies differently than if you had little or no money saved.  If you do not have any emergency savings I would suggest that you get on a detailed budget, get yourself/your family out of debt, and begin to frantically build an emergency fund.  


The second thing that came to mind was insurance.  I wondered how many of the impacted people had the right insurance, from home to renters to auto to life.  I know that insurance evokes negative feelings in many people, but it is absolutely necessary.  Insurance is all about risk management.  You pay a price (premium) to know that if something happens the insurance company will have to pay the bulk of the cost, not you.  You are transferring the risk for the most expensive things in your life to the insurance company.  If you haven't done so recently, you need to take the time to make certain that you have the insurance coverage that you need.


The final thought I had (pertaining to personal finance) when thinking about this whole situation had to do with people's ability to respond financially when something like this happens.  If you've followed this blog you know I started with the end in mind, and that was giving.  The main reason I find myself very interested in getting and staying on track financially is that it provides me with the ability to be generous with the money God has placed in my control.  Too many people today live so far above their means and are in so much debt that they are unable to respond monetarily when disasters happen.  If that's where you find yourself I would encourage you to do everything you can to change your situation.  If you need help getting started I would love to point you in the right direction and help you find a plan that works.  Being able to give when people are in desperate need is a wonderful blessing to them as well as you.  


After seeing the effects first hand, I wouldn't wish a flood on anyone! (Well, I don't guess would have before either!)  But if you find yourself in that situation, or any other financial emergency, I hope that you are prepared.  Being prepared to me means having an emergency fund of 3-6 months of living expenses set aside, as well as having the proper insurance coverage in place.  And if you see other people dealing with something like a flood I hope that you are able to help out in many ways, including being able to write a check or hand over some cash!




Vacations: Bring Home Memories, Not Debt!

It's almost that time of year again.  The kids will soon be out of school and families everywhere will be packing up and hitting the road to go on vacation.  Whether it be the beach, the mountains, Disney, or some other favorite destination, vacations are a great time to step away from the daily grind and relax (Okay, Disney was fun but I wouldn't really consider it relaxing!).  They can be much needed time away from stressful jobs and busy schedules, and can serve to rejuvenate tired parents and kids.  Not only that, but vacations can leave us with some of our best family memories.  

Now that I've built up the family vacation, let me take a step back and share some words of caution.  Without proper planning all the wonderful, fun thoughts that fill your mind when you think about vacation can be overtaken by the guilt of spending way too much and going into debt, and the harsh reality of paying up when the bill comes due.  If you're not careful you could be paying for that vacation for months to come!  

So, how can you avoid bringing home vacation debt?  The most important thing you need to do is figure out how much you can realistically afford to spend (EVERYTHING INCLUDED).  Knowing what your budget is will help you determine what options are viable.  Don't even begin to peruse the Internet before you have figured out your budget.  That's an almost surefire way to get yourself into a vacation that you can't really afford!  And you know what that means!  You'll end up bringing home more than just good memories and a few souvenirs.  

Debt – The American Nightmare

If you're like most Americans, you probably have debt.  Credit cards, student loans, and car loans are among the debts that have a grip on many in our society today.  (I'm not talking about mortgage debt in this post.)  If you don't have at least one of these types of debts (or something similar), you are in the clear minority, a rare breed!  Recently, we were talking to a relative who works in new car sales and he half-jokingly said we should come in a buy a car.  When my wife said,” No way!” because we don't have any car debt, he quipped back, “That's un-American!”  And you know what, sadly enough, he's pretty much right.  That's just the way it is!  But does it have to be?

Most people have bought into the idea that they will probably always have debt - hook, line, and sinker.  I can remember discussing with a former boss our plans to become debt free (No, we're not there yet.).  He seemed to think being in debt was a given.  I believe this is a lie that has been marketed and sold to the American people for far too long.  Being in debt is not a way of life you have to settle for.  

How can you make it without debt?  The first step is to actually make a decision that you are finished with debt, that you are tired of your hard earned money being paid out to someone else almost before you even see it!  When you've finally made that decision, the next most important thing you can do to avoid becoming/staying a debtor is to have a plan.  You know the old saying – If you fail to plan, then you plan to fail.  And for me, failing is going deeper into debt, or staying in debt when it really isn't necessary.  

A good plan needs to include what you are going to do the next time something happens that would typically have you pulling out the credit card or running to the bank to sign up for another loan. It may be that you need to focus on building up your savings a bit so you'll have somewhere to turn in these instances.  It may also be that you need to focus on becoming more content (see my February blog), and really learn what constitutes an emergency, and what the difference is between a need and a want.  A good plan will also include a method for attacking and systematically eliminating your debts.  (Hint: paying the minimum payment listed on your statement is NOT a good plan!)  If you need help choosing a method, just shoot me an email me (see below).  

If you've followed this blog, you know that we started with the end in mind, and that was extreme generosity.  When you're in debt, whether it be a little or a lot, generosity takes a back seat to paying your debts.  I hope that if this is the situation you find yourself in, like our family, you are not okay with it.  Start today by putting together a plan to rid you and your family of the nightmare of your debt so you can begin to live out your dreams!

Budget, It's Not a Bad Word!

In my first two posts I wrote about where I think personal finance ends (giving) and the rock that you need to build upon (contentment).  Now it's time to get down to the nitty-gritty of what it takes to win with your finances.  The place I would advise you to begin is not very popular at all!  Most people don't want to hear the dreaded B word, but it is a must – BUDGET!  

It seems that most people think about budgets the same way they think about classroom rules doled out by one of their (least favorite) teachers in school. But that is not the case at all.  My background is in elementary education.  I was always taught that good teachers should allow students to have a part in making classroom rules and should make them feel like it was their idea.  This gives the student ownership of the rules, and makes it more likely that they will follow them.  Guess what?  Your budget is your idea, your rules, and you are the one in control!  When you learn to budget, and actually stick to it, you'll experience a certain level of freedom with your finances.  If you think you don't need to budget, though, your money will continue to dictate the rules of the game, and you'll often find yourself wondering where it all went and how you will make it to the end of the month!   

So, how do you actually DO a budget?  Really, it's pretty simple.  I recommend a zero-based budget, so that's what I'm going to tell you about.  The first step is to write down your household income.  Next, you list out all of the expenses that you can think of for that month.  Everyone has some regular bills that are paid every month as well as some that may only be paid a few times throughout the year.  There are also the costs associated with things like groceries, transportation, entertainment, etc. (you may want to spend a month tracking some your expenses to get a better idea of how much you need to budget).  Try to think of everything you will have to spend money on for the month.  Finally, subtract your expenses from your income.  If you've done your budget correctly this should equal zero.  If you come up with a negative number, obviously you're going to need to cut some of your expenses.  If you have some money left you need to look back and see if there is somewhere in your budget that you need to allocate more money (Hint: If you have debt, there's your answer!  If you don't have debt, maybe you need to beef up your savings!).  

Once you have your budget set up that does not mean you can just cruise through the month until it's time to set up the next budget.  Part of successful budgeting is tracking every single dollar you spend during the month.  If you see that you've spent half of your food budget at the end of the first week, there's going to be a problem!  One thing you can do to help you stay on track is use cash envelopes.  Instead of constantly swiping your debit card for things like eating out, entertainment, and groceries, you take cash out of your account and put it in envelopes labeled with the different categories of your budget that you want to use cash for.  Once the cash is gone from an envelope, that budget category is finished for the month!  Tracking expenses is a must if a budget is actually going to be beneficial to your finances.  

The next question you may have is where to do your budget.  The answer really depends on your personal preferences.  If you are old school you may want to actually get a notebook or legal pad and write out a budget by hand.  If you like this idea there are many forms available online or in various books that you can copy and use as well.  In the early years of our marriage, before we even really knew what we were doing, Amanda and I “budgeted” on legal pads.  From there we moved on to using a spreadsheet template that I found online.  If you are really into using spreadsheets you can create your own, or find one online like I did. Both of those ways (paper and spreadsheet) get the job done, so if one of them suits you best, go for it!  The way I prefer nowadays is an online budget.  There are several options available that you could find by doing a simple search.  I suggest just playing around with a few of them and seeing if there is one you like best.  Just this year I started using a new one and have found it to be really easy to use.  If you'd like to know where to find it just track me down, or shoot me an email (see below) and I'll share.  

I feel like I've condensed a lot of information down into just a few paragraphs, but hopefully you get the idea.  Budgeting is an essential part of good financial health.  Clear your mind of the negative connotations the word budget brings about, and don't let another month go by that you don't have one.  And once you get rolling, don't ever go without a budget again!  

The Wise Man Built His House upon the Rock

I remember growing up we always use to sing a song at church about the foolish man who built his house on the sand and the wise man who built his house on the rock.  In the song, the foolish man's house “went splat” and the wise man's house “stood firm”.  As far as your finances are concerned the rock that you should be building on is contentment.  Too many people have this idea that if they could just have __________ (fill in the blank – more money, better job, new car, bigger house, etc.) then they would be happy.  This just is not true!

In Philippians 4:11-13, Paul clues us in on how he learned to be content: 

11-- I am not saying this because I am in need, for I have learned to be content whatever the circumstances. 12-- I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. 13-- I can do all this through Him who gives me strength.

For Paul, happiness had nothing to do with what he had or didn't have.  His contentment was a direct result of his reliance on God.  

If you are approaching your finances with the idea that once you get your money in order you'll finally be happy, you are sorely mistaken.  Don't get me wrong, having your finances in order can alleviate stress in your life and make some things easier to deal with, but it can't bring about contentment.  That only happens when you trade your worldly mindset for an eternal one, and reset your focus on Jesus.  When the foundation of your finances is contentment attained by fully relying on God, you'll be well on your way managing money His way!

Where Do We...End?

In the movie Cars, there is a scene in which Mater, the rusty old tow truck, demonstrates his backward driving abilities for race car Lightning McQueen.  Mater ends his demonstration by saying, "Ain't no need to watch where I'm goin', just need to know where I've been."  When it comes to personal finance, too many people choose the same philosophy as Mater.  Money comes in and money goes out, and all they do is look back and see where it's been (or even worse, they can't tell where it's been!).  There is no planning for the future, no ultimate goal, nothing to look forward to.

As I start this year-long (at least) blog, I want to challenge you to not be one of those backward drivers when it comes to your finances.  I want you to know where you're headed when you start the journey to getting control of your money.  I'm sure you've heard the phrase, "begin with the end in mind".  It is that mentality that really got me fired up about getting my wife's and my financial house in order.  And I hope that if you see where this whole process ends, it will fire you up too!

So, where does it end?  I believe it ends with one word - giving!  Extreme generosity is what you make possible when you are intentional with your finances.  It won't happen overnight, but if you get control, live on less than you make, and have a plan, you'll eventually be able to be in a position to do some outrageous giving.  And when I say outrageous, don't get wrapped up in the idea that you'll never have "a lot" of money to give.  This process is not about the dollar amount you have to work with.  It is about putting yourself in a position to be able to give a significant portion of what God has entrusted you with, away to help others and do good - whatever that dollar amount ends up being!

As we move through the year, I will write about the practical steps you should be taking as a means to this end.  But I hope that in answering the question we started with - Where do we end? - I have provided you with some motivation to boldly and deliberately take these steps toward good financial health.  If you do, you will be well on your way to the ultimate goal, the most fun and joyful thing you'll ever do with money...GIVING IT AWAY!