Living within one’s means: a lost concept? Pt4 Developing Discipline

 

 

 

 

 

 

 

 

 

 

 

 

In the previous post we looked at a problematic heart attitude that many times is what drives us to overspend. All too often we are not content with what we have in life because our affections are set on the things of this world, and not above, where Christ is seated. We looked at how contentment is not something that comes naturally to anyone, but rather it is something that is learned from Christ. So, we realize our need for contentment, we have asked God to help us to set our affections on him, and not on the world…so how in the world do we now get to the point where we have more control of our income? How do we stop from overspending? It is my purpose in this post to give some practical tips and advice as to tools that we can implement to help us not overspend. I cannot take credit for much of what I am about to share. Most of these principles I have learned from others, as well as popular financial teaching from men such as Dave Ramsey and Larry Burkett.

 

However, we must realize that we will never be able to implement the practical tips given here if we do not work on building a certain something into our character. This is a dirty word to most of us, and none of us, if we are honest, enjoy this. What I am speaking of is good old fashion discipline. I myself do not really like putting in place discipline in various areas of my life, but I do like what discipline produces in my life. Hebrews 12:9-11 says: “Besides this, we have had earthly fathers who disciplined us and we respected them. Shall we not much more be subject to the Father of spirits and live? For they disciplined us for a short time as it seemed best to them, but he disciplines us for our good, that we may share his holiness. For the moment all discipline seems painful rather than pleasant, but later it yields the peaceful fruit of righteousness to those who have been trained by it.” While this is speaking of parental discipline that God disciplined all who are his…to produce righteousness, the principle remains the same. If we discipline ourselves in certain areas we too will begin to see financial fruit in our life.

Implement a Budget

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This is a buzzword in our culture now, since it seems as if the US Government is totally incapable of balancing their own. However, for any individual or family who has any level of income and expenditures, writing, balancing and following a written budget is a must. We need to be intentional about our income. As Dave Ramsey says: “Children do what feels good, adults devise a plan and follow it.” With our income, we must make sure that every dollar has a name. The simplest way to do this is to open up an excel spreadsheet and put the expenses in one column. Then at the top of the next column put the take home pay amount for that period. In that same column, put the amount allocated for each expense in the row across from its name. the goal is that after the budget is made, the balance is $0.00 If you have money left over, do not just leave it floating around…give it a name too! Put it in savings, or car replacement fund. Or “vacation” fund, Or ring fund, or house down payment fund, paying off debt fund, or Christmas shopping fund, wherever it needs to go. The point is: you tell your money what to do.

Envelope System
While this is taught by Dave Ramsey, this is a system which I found helpful before I ever heard of him. I haven’t used it in years (just used my debit card instead to pay for everything) but in the last few months, I have stuck to using this system again, and it has revolutionized my spending. The concept is instead of paying for everything with plastic, use cash for certain things. For example: I do not pay all my bill using cash, (some bill I pay online with my debit card), food, groceries, gas, and other such things I use cash in envelopes. This helps to greatly cut down on impulse spending because you can see just how much money you have to spend on each area. If everything is purchased with a debit card, it doesn’t sink in unless a detailed ledger is kept. With cash, it hurts to spend it because you can visibly see just how much money is leaving as a result of each purchase. Also, this system helps to not spend money which we don’t have…with a credit card.

There are several myths floating around about why we need credit cards. MYTHS: People say that we need them to buy plane tickets, book hotel rooms, make purchases online, and of course you have to build your FICO score in order to qualify for a home mortgage. TRUTH: I personally have bought multiple plane tickets, booked many hotel rooms, and bought many items online over the years using my trusty ATM debit card. And while some lenders may be too lazy to lend if someone does not have a FICO score (which is only a number that shows how well a person manages debt), there are many other who will look at how well you pay bills, current income, size of down payment, and other factors not involving debt, to gage whether or not you qualify.

Save And Pay With CASH!
This is a concept that is very difficult in the culture in which we live. We are so used to being able to charge whatever we want on credit cards or take out a loan. We buy with borrowed money so we can have what we want when we want it, and then end up paying back twice or three times what we borrowed. Let’s do some math and see what we could do if we save up and pay cash for things.

People spend between $200 and $1,000 a month, sometimes more on car payments, and end up spending tens of thousands of dollars more than what the car is worth when they actually do pay it off. Instead of making car payments, let’s take $500 a month and put it aside. At the end of only 10 months, you will have saved up $5,000! That will buy a very good, reliable second hand car. So you want something nicer? Ok, do this for 20 months and you can pay cash for a $10,000 car! Or do this for only 30 months (that’s only 2 ½ years) and you can pay cash for a $15,000 car!! It will take some discipline though!

 

Education

How about this: College. Do we really have to go in debt to go to college? Imagine if a 18 year old, right out of high school took 4 years off of school instead of going to college right away, lived at home to keep expenses way low, worked a minimum wage job for 40 hours a week: assuming minimum wage is $7/hour, that is on average $14,560 per year! Living at home, he or she would not need any more that $4560 per year to live on. Therefore, after 4 years, they could save up $40,000 for college! Not to mention, financial aid, scholarships, in state tuition, and other cost saving things. This will not only require a great deal of discipline, but will also require a whole new way of looking at college. I will address this in much more detail in a coming post series on doing college differently.

These are just a few ideas of how we can better structure our finances in order to better live within our income. One thing that I have not mentioned up to this point is the importance of giving. We must remember that all of the money we make is not ours to begin with: we are merely stewards of the money that God has entrusted to us. Therefore, we should be giving the first fruits of our money back to God. The Word of God speaks of tithing all throughout scripture. Tithe literally means 10%. This is the minimum. As we are able, we should be giving above and beyond this to help other believers in need. We should not do this out of compulsion, but willingly, because God loves a cheerful giver (2Cor 9:7). “But I can’t even afford the bare minimum 10% tithe!” we must remember that this is a stewardship issue. This is NOT our money to begin with. The money is the Lord’s. the question is, are we going to be obedient with the money that God entrusts to us, thus trusting that God will supply all of our needs according to HIS riches in glory(Phil 4:19)? As tight as money may be at times, that does not excuse us for forgetting our role of stewardship with the money that we earn. If we can be wise with our finances and get to the point where we live within our means, we will be in a much better off position to continually bless others in need.

 

Living within one’s means: a lost concept? Pt3 Too much Overspending!

In the preceding posts we looked at a problem that is plaguing our society. It is a problem that transcends every level of our society, from the Government all the way down to the individual. This is the problem of overspending, thus causing us to live above our means. So, why is overspending such a problem from an individual level to the national level? I believe that in most cases there are heart issues that need to be dealt with. Before we continue, we must remember that there are legitimate situations where people fall on difficult times, and if they are not financially prepared to deal with those situations, overspending becomes a reality in their lives. These are not the situations that I am addressing here. What we are looking at through this series is overspending as a result of a mindset that needs changing.

We live in a culture that is plagued with the need for instant gratification. We want what we want, and we “need” it now. We need faster internet, faster phone service, fast food, and the list goes on. This also overflows into our spending habits. We need a bigger truck, a nicer car, a better entertainment center, nicer furniture, better clothes, a better house, and we need these things NOW! The problem is we are not content with where we are in life. Contentment is not something that comes naturally to anyone. In the last post, we talked about the importance of being able to delineate between wants and needs. If we have not learned the difference, then we will have an even more difficult time being content. We will never be content if we are convinced that most of our wants are actually needs.

So what can we learn from God’s word about contentment? Let us see what the apostle Paul says about contentment in his own life. Phil 4:11-13 says: “Not that I am speaking of being in need, for I have learned in whatever situation I am to be content. I know how to be brought low, and I know how to abound. In any and every circumstance, I have learned the secret of facing plenty and hunger, abundance and need. I can do all things through him who strengthens me.” Paul says that he has “learned” how to be content in any situation.

Therefore, we can see from this passage that contentment is something that is learned. Many times the Lord uses difficult circumstances in our lives to help us learn contentment. Paul says in verse 14: “I know how to be brought low, and I know how to abound. In any and every circumstance, I have learned the secret of facing plenty and hunger, abundance and need.” This shows us that contentment is not something that is based upon our situation. This is the context of Philippians 4:13 which shows us that we can do all things through Christ who gives us strength. But what is “all things” referring to? Clearly the context is that Christ gives us the power to be content in every circumstance whether good or bad. So whether we have a lot, or a little, Christ is the one who empowers us to be content in each situation.

So what else does Paul say about contentment? He says in 1Tim 6:6-8: “Now there is great gain in godliness with contentment, for we brought nothing into the world, and we cannot take anything out of the world. But if we have food and clothing, with these we will be content.” It is a great gain for us to have godliness alongside contentment. Paul says that we should be content with our basic needs satisfied, food and clothing. Paul brings out an important point in verse 7 when he says: “for we brought nothing into the world, and we cannot take anything out of the world.” Paul is reminding us how temporal all of these earthly, material things are. We can’t even take them with us when we die.

So why is it so difficult for us to be content when are basic needs are met but many of our wants go unmet? It is because of where we place our affections. If our affections lie in earthly temporal, material things, then we cannot be content until we have something better then what we do possess. Thus we will be willing to overspend to obtain it. However, if we follow Paul in what he says in Col 3:1-2 which says: “If then you have been raised with Christ, seek the things that are above, where Christ is, seated at the right hand of God. Set your minds on things that are above, not on things that are on earth.” If we set our minds on things above, where Christ is, it will be much easier for us to also say like Paul: “In any and every circumstance, I have learned the secret of facing plenty and hunger, abundance and need. “ we too can face any situation in life with contentment, through the power of Christ.

When our affections are on Christ, we don’t mind driving a $1000-$5000 reliable used car. We don’t mind not having the latest Iphone. We don’t mind not having new leather furniture or a big high tech entertainment center. When our affections are set on Christ, we don’t mind renting a little longer until we are more financially ready to purchase a home. If our affections are on Christ, we don’t care about driving expensive cars and nice trucks…they would be fun, but we don’t need them. Having these things are not necessarily wrong, but if these things are what our affections are set on, we will make unwise financial decisions in order to get them. It is time that we refocus our affections on Christ, and learn true contentment from Him. Phil 4:19: “And my God will supply every need of yours according to his riches in glory in Christ Jesus.”

So, we see that a huge part of being able to live within our means isn’t as much increasing our income, but rather changing our mindset about what is important. Our income, no matter how small, can go a lot farther if we have no car payments, credit card payments, school debt payments, house payments and so on. However, this is not something that we can do in our own strength, we must ask God to teach us contentment and to help us to set our affections on Christ, and not on things of this world. Next time we will wrap up the series with a post on some practical helps to which we can live within our means. Don’t miss it!

 

Living within one’s means: a lost concept? Pt2

In the last post I shared what specific incident inspired me to write this series. Since then, I have been thinking more and more about specific common ways in which we live outside our means in the culture which we live in. Unfortunately we live in a society that is plagued with the “need” for instant gratification. So many times, we as adults act like children…we want what we want, and we want it now! So we will do whatever it takes to get it regardless of what it may cost us. Because we have a wrong view of what some of these “necessities” really are, we are willing to go into debt for things that we don’t really need. This is why it is so important to learn how to distinguish between what is a want, and a need. It is my goal in this post to look at some of these areas that we typically “live beyond our means” in, and to help us to look more closely at what is a want, and what is a need.

Vehicle (I’m 25 years old and I NEED that new Mustang! Its fast! Its fun! AND I will be the cool guy among my friends if I have this car. I guess I could pay cash for this $2,000 very reliable 1995 Honda Civic with 130,000 miles on it, but I would be the laughing stock of my friends! A 16 year old car? A four cylinder engine? No cool paint scheme? I just can’t do that! I’ll go ahead and take out a car loan and pay minimum payments on it until I’m 45 years old.) We must step back and ask ourselves…what is a vehicle? Is it a toy to have loads of fun with? Is it a status symbol to impress the masses? If your answer is yes, than chances are you will end up living beyond your means in this area. However, if we understand that a vehicle is merely a means to safely and reliably get us from where we are to where we need to go, the $2,000 Honda doesn’t sound like such a bad thing after all.

Credit Card Spending (I absolutely need the latest x-box system! I have got to see this new movie in theaters! I need new rims for my car! I need to get this new videogame!) or maybe it sounds like this: (I need all these extra juices, soda, chips, candy, doughnuts and coco-puffs…but only have enough cash for the eggs, bread, milk, meat, rice, fruits & veggies!) or maybe this: (I absolutely need this $150 dress….oh! and that $50 hat to go with it. And if I’m going to get these I will absolutely need 3 pairs of $60 shoes to rotate with it. And let’s not forget the accessories!) Can we identify? Well, I can’t really identify with the third one but the point remains the same. The amount of cash that we have is a lot more limited then the line of credit that comes with a credit card. Therefore, it becomes easy to spend money that we don’t have (on a credit card) and end up paying quite a bit more as we pay off the credit card with minimum monthly payments. So the question is…did we really NEED all the stuff mentioned above? Again, a shift in thinking is what is actually needed here. If you have to charge it, you probably can’t afford it.

House (We’re getting married in two months!!…we’ve just got to start out our journey together as home owners. I mean, we can’t rent can we? What would people think if we didn’t own our own home? If we are planning on owning one at some point, why not start out with one? Ok…so maybe we don’t have any money for a down payment so we would have to take out a loan to cover it…in addition to our mortgage payment…and so if we make the recommended monthly payments on both, paying off the principle plus interest will take…….over 30 years! Ok let’s not think about that side of things we need a house now!) Or do we? Is it wrong to rent for a few years while working towards saving up a sizable down payment for a house? While most families grow to the point of needing a house of their own to call home, very few young couples actually NEED a house the second that they are married. Maybe a little more strategy might be in order?

Higher Education (Oh no! high school graduation is four short months away! I need to know where I’m going to college! I mean, I have no idea what career path I plan on preparing for, but I NEED to be in college in the fall! The money from financial aid and scholarships, along with the money my parents are able to help me with cover 1/3 of the first years tuition…where is the rest of the money going to come from?…oh well, I’ll just take out student loans because I NEED to be in college as soon as I graduate high school!) Or do I? Should I really pour thousands of dollars into an institution of higher education (which is designed to prepare me for a career) if I have no idea what career path I plan to take? Should I go 20,30,40,80 thousand dollars in debt to prepare for a job that will only pay me enough to get those loans paid off in 20 years? Would there be any thing wrong with working a job for a little while right out of high school (saving for college) while I figure out what career path to take? (I will discuss this in much more detail in another post series in which we will consider reexamining the way we do college.)

Vacation (We need a vacation! Not just any vacation, we NEED a week long Caribbean cruise! We deserve a break! We have been working so hard, we can’t have any old vacation, we need this cruise! Ok…so between the plane tickets for the 5 of us to fly to the cruise ship departure port and the cruise tickets themselves for us 5 are going to cost over $4000…we didn’t save up for that…hmmm…let’s just use the credit cards to pay for it! Because we NEED it! And we NEED it this July!) Or do we? There are many different, much less expensive options for families looking to take a restful, fun filled vacation. Would it be such a bad idea to explore some of these options? Would it be a possibility to postpone the big cruise (or other expensive vacation) for 5 years and save up to pay for it? Yet again, a shift in thinking is needed.

While there are many more areas in which we do not live within our means, the areas listed above are a few of the big ones. While learning how to distinguish between a want and a need is a very important lesson to learn, it only begins to deal with the root issues behind why we so often live beyond our means. Now I understand that there are cases in which a spouse has died or neglected their family, and other such extenuating circumstances. I am not dealing so much with those, as I am the heart issues that cause us to blur the line between desire and necessity. I will discuss some of these heart issues in my next few posts.

 

Living within one’s means: a lost concept? Pt1

At the apartment that I share with 3 other guys, in our kitchen area we have three bins for recycling. One for plastic; one for glass/aluminum; and one for paper/cardboard. The paper and cardboard is usually used for fire starter in our fireplace. As I stumbled into the kitchen this morning at around 5:15 a.m. to make a cup of much needed coffee, something in the paper bin caught my attention. It was a bright yellow and red paper that read: “Get cash today with a TITLE LOAN!” and in the top right corner was the timely added phrase: “GET CASH FOR THE HOLIDAYS!” The ad went on to say the following points in bold writing: >Bad credit OK! >You keep your car! >come in today and drive away with cash in hand! And >We’ll match any rate!

As I turned the leaflet over, the ad got even more interesting. At the bottom it read: bring these following items for faster approval of your title loan: 1. Your vehicle and an extra key; 2. Driver’s license & social security card; 3. Current paystub/proof of income; 4. Clear auto title. At the top right corner of the ad there were two small paragraphs in small font. The last line at the end of the second paragraph read as follows: “An example of a typical title loan would be a $1,000 loan with a monthly interest rate of 18%, 12 monthly maximum payments of $208.63, and an annual percentage rate of 215.999%.”

I did the math and based upon the maximum monthly payment, the least you would possibly spend paying back your title loan is $2,503.56. I cringe to think of how much a person would spend if they made the minimum monthly payments, information which this “Approved Cash” lender did not disclose.

As I pondered what I was seeing in this ad, I was baffled at how anyone could look at this offer and consider it to be attractive. the scenario is this: you sign over the title to your vehicle as collateral to a lender so that you can borrow $1,000…which you will end up spending more than $2,500 to pay back, and if the payments cannot be made to the lender, you have given them the right to repossess your vehicle to make up for their losses. It occurred to me that this is a great example how we have been taught from birth in this culture to live well outside our means. Simply put, living beyond one’s means is another way of saying that our expenses are more than our income.

Unfortunately this has become a way of life for too many of us. In the coming weeks I will look into the typical ways in which we live beyond our means; the root problem behind most of the situations in which we live beyond our means, as well as some ways in which we can take steps to living within our means. Join me in the coming weeks as we explore this issue that is plaguing our society.