I know Backwards Day was last week but my wonderful dh wrote this post yesterday and I just know there are some other Works for Me Wednesday bloggers who have words of wisdom for us regarding finances. Leave a comment, we need all the help we can get!
________________________________________
This blog doesn’t really have anything to do with daylight savings time, although the recently-lost hour of sleep looms large in my consciousness. This afternoon Kathy and I were talking about a novel concept: saving money.
It isn’t an idea that comes very naturally to either of us, I’m sorry to say. We tend to live ‘in the moment’ much of the time, and (thanks to an excessive number of credit cards) we usually just buy something if it is not very expensive and we want it. We don’t go in for big ticket items, but the steady flow of self indulgent and other-indulgent spending is definitely not under strict regulation.
I looked it up on the internet, ’cause if it is on the internet, you know it must be true. It is sort of funny to see that there is a whole Wikipedia page on the subject of savings — I guess I’m not the only one that needed to research this strange concept.
Don’t get me wrong — we do actually do some saving. My employer matches a part of my 401(k) savings so that I’d be a fool not to put aside 5%, so I do. But apart from that, we don’t really save. We use credit to buy things we need but can’t afford, and (like many Americans) we have some considerable month-over-month credit card debt.
One of the significant problems we face is that saving doesn’t seem real, when you have any kind of debt. It doesn’t make a lot of sense to put money aside in a bank account that doesn’t generate interest, when you could pay off debt that probably costs you at least some kind of interest or fees. But once you pay off some debt, when do you decide that you can buy that item for which you are saving?
Thankfully this stuff only cost a dollar.
Let’s start with a hypothetical example: suppose you owe $5000 on credit cards, and you’re paying 6% interest on that debt. Suppose (hypothetically, remember) that you really want to save up for a new computer that costs $700. What do you do?
One school of thought is that you pay off the entire $5000, before you even think of buying anything you don’t absolutely need. “Attack debt like the cancer it is!” they cry, frothing at the mouth at the idea of debt unvanquished. While such ideas are very inspiring, they don’t really take into account the self-indulgence that probably caused the situation in the first place. When I contemplate this scorched-earth attitude toward debt, and the barren wasteland of consumerism it requires (even for a season), my spirit quails. I’m just not willing to wait that long to gratify my desire, unless I have to.
Another school of thought gives a nod to motivating the saver, and suggests that payments against debt must be made, but (once those payments are satisfied each month) allows saving toward a goal. Supposing that monthly income minus expenses netted $400, they would say, “Spend half on retiring debt and half for future savings.” All other things remaining equal, this would mean that in three and a half months you’d have paid down your debt by $700, and saved enough for the new computer as well.
Maybe Sarah should save up some money for a new hairdresser.
One problem with this is it is sometimes hard to see where the money goes, and hard to avoid dipping back into the debt that you pay off. Suppose I’m two months into my savings plan, and I’ve paid off $400 in debt and saved $400. Suddenly, you realize that you have to fix the brakes and tires on your car, which (hypothetically) costs $700. Do you:
- (a) wait to fix the brakes until you’ve saved the $700, even if waiting may be unsafe or cause further costly damage to the car?
- (b) spend the $400 that you’ve saved toward the computer, pay the rest on a credit card, and start over on your savings?
- (c) pay the whole $700 for the brakes on a credit card and leave the $400 in savings alone, since it is allocated toward a particular item?
- (d) pay the $400 from savings to the brake shop and negotiate for monthly payments (to avoid increasing credit debt)?
Not my actual cash …
Also, how do you actually handle the money? Do you put the $400 in a separate savings account, or do you go ahead and use it (until it is needed) to pay off the credit card?
Perhaps the most widely-accepted school of thought reasons like this: “Once you have a debt that is more than you can easily pay off, you might as well just buy whatever you want (within reason) and try not to let your debt get any bigger. Why get all upset about it, or deny yourself? Sooner or later, you’ll get a bonus, or you’ll sell your house for a profit, or you’ll earn more money … or something will bail you out.”
Of course, this last school of thought may be partly responsible for the massive 2.545 trillion dollar consumer credit debt currently plaguing our citizenry.
Several Bible passages come to mind:
The rich rule over the poor, and the borrower is servant to the lender. — Proverbs 22:7
The wicked borrow and do not repay, but the righteous give generously; — Psalm 37:21
Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor. Love, for the Day is Near. Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law. — Romans 13:7-8
I know there must be at least one or two savers out there. What do you do? What practical steps do you use to help you get control of your money? Please be gentle — remember, you’re dealing with typical American consumers, thoroughly indoctrinated in the ways of easy credit.
Tim
Funny this subject should come up right now. I’m preparing a Bible study lesson on spiritual gifts, and one of this week’s gifts under consideration is the gift of giving. How much to give how much to save also come up in the discussion. How to be responsible and careful with money without “storing up for ourselves treasures on earth.” How to be generous without being irresponsible. Probably so many ways to address the love of consumerism in our lives… what we do is give 10% to the Lord’s work, save at least 10% and use the rest. We have some long-term investments, which these days aren’t doing so great, and some typical savings accounts, which, again, get so little interest you wonder if the mattress might be just as good a place for it (except too easy to nip into). When we’re on an even financial keel, all needs being met, if a raise comes along, we try to put it in savings RIGHT AWAY and EVERY month before we get used to spending it. We’re pretty rabidly anti-consumer debt. WORLD magazine’s Jan 26/Feb 2 issue had an article about the wonder of “compounding” for savings. So get saving now!! For what it’s worth…
Hi Tim,
We’re saving AND paying off debt from 10 years ago AND paying out for the most expensive time of our children’s lives AND paying a huge mortgage which, due to previous financial stupidity, we will be paying off well into our 70′s. Good job we’ve got not pension, isn’t it?
So, you can see , we’ve made total mess of things. HOWEVER- everything we do NOW is based on Biblical principles! Check out crown.org. Loads of exellent articles there on precisely what that means.
The main principle is that this money we have ISN’T OURS. It’s His. And there are people in the world (our brothers and sisters) who have nothing. Imagine you left a fortune to Joshua and none to your other children. I know, unlikely at the rate you are going! {vbg} Presumably, you would have left it to him with the proviso and confident expectation that he would use the money to bless his siblings. That’s what Our Father expects of us.
I’m not talking about percentages, not interested in them. I’m talking about realising that it ALL belongs to Him and we are His stewards. How does your money further His kingdom? If you are in debt, it can’t. You aren’t free to work for His Kingdom.
These are the painful truths we’ve learned in the last few years and we are trying to correct our situation. We no longer buy things because we like to treat ourselves (and we don’t feel hard done by at all) because we judge every expenditure now in the light of how it Furthers God’s Kingdom.
When we write like this it’s hard not to feel afraid that we’ll be dismissed with that horrible word ‘self-righteous’. I’m not self-righteous. I have no righteousness. We’ve made stupid, selfish decisions which we are still paying for. Until we’ve dealt with them we won’t be free to work for God. And that’s our aim.
Just some thoughts, hastily typed before I help my 14 with Maths this am! Forgive me if the tone isn’t quite right. No time to edit properly.
This could have been our blog several years ago! Instant gratification is a tough thing to overcome. But you must! Cut up all the credit cards except one and DON’T use it for anything. A true emergency like the brakes is fine unless you have money saved up. If you have the money in savings, you use it then start saving again for the ‘extra’ thing you want.
It is hard and it is yucky to tell ourselves ‘No’ but, it builds character!!! At least that is what my dh tells me!
My dh uses a program called Mvelopes from Crown Ministries. It is a computer program that helps you set up a budget and then live inside that budget. It has been amazing! We have been able to see our spending habits and some of them are very convicting!
Not much help I guess, sorry. Just be encouraged and keep asking questions and keep trying.
Keep praying.
blessings,
renita
First I have to say honestly that I have never had credit card debt. I grew up in a mostly single parent family with limited financial resources. I learned at a young age not to spend what we didn’t have.
My dh thankfully was on the same page about finances when we married almost 20 years ago. When some emergency came up (usually a car repair) we would pay for the repair out of $$ set aside for such emergencies.
We don’t buy what we can’t pay for at the end of the month. The only “debts” we’ve had were student loans, car loans and mortgage. Currently we are fortunate to have none of those but we will have a mortgage in just a few short months.
I would suggest reading Dave Ramsey. I learned his method early in our marriage and it put us on the right path from the beginning. I no longer keep track of the indiv accounts but we do save (IRAs, mutual funds, TSP and savings account) and we tithe (that I do keep careful accounting of – to be sure I’m giving what I planned to give and for tax records)
Tim and Kathy,
I recommend http://www.beingfrugal.net . Lynnae is a Christian blogger working her way out of debt and she is an invaluable resource for folks who want to be encouraged in solid financial stewardship. I enjoy her cameraderie. She encourages me to keep on thinking financially healthy. Like Dorothy, I recommend Crown.org as well. (Larry Burkett’s ministry)
Chuck and I have been debt free for four years. We got so over our head that we had to use the Consumer Credit Counseling Service to get back on track. We, personally, have chosen to not use credit cards at all anymore. It’s been quite a journey of learning to trust God over plastic. You wouldn’t think it would that difficult of a choice! But it was. I’m personally glad to be free of credit card slavery. Last week, I received a pre-approved credit card application and I threw it out without a thought. It’s good to be free.
What we’re working on right now is increasing our income…so that we can make the next healthy step. (Saving for the future…)
Blessings,
Yvonne
Hi Tim and family,
I’m joining you from Chris’ Notes From the Trenches blog.
It was fun to see this topic come up because this has been a huge focus in our lives recently. We started on our first ever budget the beginning of February and it has truly been worth it. If you could have been a fly on our wall this past weekend, you would have heard my husband and I discussing the fact that we had no idea how much money we had before doing this budget. We were spending it so fast that we always felt like we didn’t have any disposable income. Now we are finding that we have much more income than we knew, now that we are tracking where it is going. And that has been HUGE!
In the past month and a half, we have paid off three credit cards in full and have one left. THAT is exciting!
My first and best recommendation is that you get the book “Total Money Makeover” by Dave Ramsey. We follow it fairly closely but not as rabidly as some. We have left way more money in our budget for things like eating out, shopping at Target etc than most people who follow his plan, because otherwise it would be like a diet..we would do it a couple of months, quit and then buy everything in sight.
Please feel free to email me, I’d be happy to talk with you more about it.
Leeann
Our dear Edgrens,
As the recipients of some of your wonderful generous natures and love of buying gifts, I know that much of this spending is to bless others and share with them the resources that God has given you.
We had our own struggles with debt, some from things you mentioned but much from foolish and unwise financial habits. Trying to have more than God had given us, not being content with His provision.
I can tell you, it is fantastically freeing to be out of debt. We never want to go back. Not that any credit card company in its right mind would ever give us a card anyway.
Now that we operate on a nearly purely cash basis, it is much easier to track where our money goes and limit our spending. We pull out our allotment for the week, and have to make it last.
Of course when there happens to be some left to carry over to the next week, yippee!! Something extra is allowed!
Love you Edgrens!
Thank you, each, for your insightful and kindly comments. I will need some time to ponder and consider these things … but I am deeply appreciative for the time and effort you have taken to share with me your strategies.
Dorothy, your comment about self-righteousness caught my eye in particular — rest assured I am not offended by or dismissive of the advice I’m receiving. I am gradually becoming aware that poor stewardship on my part is sin, and I’m very interested in finding a way to correct this problem.
We are ardent Dave Ramsey fans. We didn’t used to be. After all, I’m married to a CPA/ CFO. We know how to “use” money, right? Wrong. We (mainly me) are not to be denied what we want, when we want it. Well… That’s how it used to be… Then Dave came along. Slowly, but surely, over the last 12 months, we have changed our thought process and at the same time our finances, our hearts, and our family tree.
Dave would say: Get $1000 in the bank today! Scrimp by for a few weeks and take EVERY single extra dollar. Sell stuff. Deliver newspapers or pizza. Just do it NOW! That becomes your “beginner Emergency Fund” or “Murphy repellent”. That money is ONLY for emergencies. Period. If it gets used (on brakes, for instance) it must be replenished with the same gazelle-like intensity.
Next, we commit to taking on NO MORE debt. It has to stop. We have proven again and again that, despite our knowledge and great intentions, we cannot get ahead using debt. All we get is more in debt! We have not used a credit card in 18 months. Mind you, we’re still paying on a few, but we haven’t added a single $1 to our cc debt. You know what the Bible says about debt. We don’t pick and choose what we believe and we know that Lord wants whats best for us. I don’t believe He would tell me that I am the exception to that “slave to the lender” idea.
Now, we’re in the midst of our “debt snowball.” Minimum payments on all but the smallest debt. All extra monies toward that smallest debt until we pay it in full and off the list it goes! It has been very motivating for us to take item after item off that list over the last year. In addition, we have had “life” happen and have paid cash for all of it. Massive car repairs, medical bills, propane (Ack!), and such.
Our bills are not for cars, nice furniture, fancy vacations (although I would like all of those things). They are for little life things over the last 15 years. A little here. A little there. No more. Now, we are 100% intentional about our spending. Our marriage was always great. Now, it’s even better. We have a “budget meeting” twice monthly (when dh gets paid). Our communication about all things has improved with this simple step.
Our next steps will be refinancing the house to a 15 year mortgage, fully funding our emergency fund with enough to cover 3-6 months of living expenses, and then kicking our retirement back into high gear while setting aside for the kiddo’s (four of them here) college.
Right now, we’re “living like no one else, so later we can LIVE LIKE NO ONE ELSE!” We cannot wait to be debt free and no longer be a slave to VISA. We can see the light at the end of the tunnel and we’re running as fast as we can.
Sorry about the long post. Just wanted to give you a Dave Ramsey perspective. Common sense and discipline together in steps that I can actually do! Credit will never create blessings in your family.
Be encouraged. There are lots of us on the same path!
Karen in MT (SHS loop)
Here’s what we did:
We CUT UP all but one of our credit cards. This one is for TRUE emergencies and for gasoline ONLY.
For a couple of months (just so we could see where money was going out without patience and self-control) we took several envelopes and labeled them for absolutely necessary expenses (coffee and chocolate doesn’t count; tithing does). We cashed our paycheck and put the CASH amounts into the envelopes. Whatever was left was divided by three: credit card debt, savings, and play money. It was a great visual and a very rude awakening on how foolish we were in our spending.
This helped us not feel totally deprived. It worked much like how your computer chip play works…when the chips are gone for the week, you just don’t get computer games, right? If the play money is gone, well,….Time to do a few odd little jobs, my children, or do without. Hint: If the children want silly string, make THEM pay for it! I’m sure the neighbor needs a lawn mowed or windows washed or something.
Over time we realized we were, well, foolish and irresponsible with GOD’s money. HE blesses us and if the way we use it is not blessing others or furthering HIS kingdom, then, well….I’ll let you and yours fill in the blank.
We now NEVER carry credit card debt over to the next month. Yes, we have debt still (house, car, law school loan), but we’re working on them responsibly. Credit cards are, dare I say, the devil’s tool to teach us the opposite of God’s ways…self indulgence, impatience, me, me, me, want, want, want…Plus, if you don’t pay them off in full you end up paying DOUBLE or TRIPLE for something due to interest rates! A three dollar cup of coffee could end up costing six or nine or even twelve dollars as that cost is rolled to the next month! Uh, oh, you got me started.
As far as the multiple choice question above…I’d choose ‘d’. Sometimes sacrifice is necessary for emergencies.
Many Blessings as you seek freedom from the control of debt,
Holly@aiminghigh
I realized I gave the wrong name.. it was not Dave Ramsey but rather Larry Burkett that I learned about in our women’s Bible study way back in TX (our first military assignment) – we are heading for our last assignment in 97 days
Renee (SHS)
wow. Those are quite the answers you’ve gotten so far!
I have no advice. Just liked the silly string pictures.
We’re Dave Ramsey fans, too… currently taking Financial Peace University at our church. As one of the other commenters said, we’re not as rabid as some who take the course but are following the plan pretty closely. The course is built on Biblical principles and, when you listen to what he’s saying, just makes sense.
Good luck with this… money matters are very stressful to deal with. We, too, are a family with one person with a financial degree, and another with a math degree. We should know how to manage our money better, but are learning so much from Dave Ramsey that I really believe that what we’re learning will help make us better servants to God, as well as strengthening our marriage at the same time.
Oh! And Dave Ramsey also references Larry Burkett quite a lot in his talks. Just FYI.
One of the things we do is only use our credit card to pay for things we know we can afford anyway. We do use it quite a bit, but only so we can earn our rewards, and we always pay it off right away.
Another thing we do is use cash. We take out a month’s worth of cash for groceries, entertainment, household, etc., and when the cash is gone, it’s gone. We often eat lots of pasta, tacos, and breakfast for dinner the last week of the month, but we eat well the other three weeks, while still stocking up our pantry and freezer.
I love you, Tim and Katherine!! I’m on your side!!
Aunt Kate
When Brian and I were first married, we were both in debt. It took us a few years, but we managed to get out of most of it.
Once we started adopting, we realized we had to stay out of debt as much as possible…adoptions are not cheap. Instead of getting a newer car, we adopt again!
If we do get in debt, we pay it off as soon as we can. Any money windfalls, tax returns, overtime, gifts or refunds, would go toward debt reduction.
We have a small, normal savings account that is our emergency fun. We use this for things like appliances breaking.
The biggest advantage we have going for us is that we don’t tend to be spenders. I do not enjoy shopping like most women I know. I would rather go to the garden center than clothes shopping. I only go to WalMart about once a month. Any money we have extra goes for doing things rather than accummulating things. We like to camp and do things like that.
I have been enjoying the answers you are getting. I’m sure we could all use help in this area.
I just finished reading “The Treasure Principal” by Randy Alcorn and it has a lot of wonderful insight for such a little book. I would recommend it.
I had the same problem as you; lots of debt from small credit card buys in college, to the point where it really seemed silly to save, but that in turn made me impulse buy more as soon as I got the debt down even a little bit. My advice? Take a look at DAVE RAMSEY’s site. He is awesome and inspiring and he has been there too. He has a “no credit cards, no debt” philosophy that my family and I now live by and it is the GREATEST feeling ever to have no debt of any kind (except a home mortgage) and a very nice nest egg saved while now being able to spend all the excess money we were putting into debt on the things we need or want. Our credt cards were cut up years ago and it is AWESOME. Here is his site: http://www.daveramsey.com. I also have a link to him on my site. I hope my advice helps; he helped me tons. Take care!
Wow, you ask a lot of tough questions.
My husband and I used to be terrible with money. Several years ago we decided to really buckle down and get a handle on our finances. We canceled all our credit cards, and closed out Brad’s separate bank account.
I made a list of all regular bills and when they are due, and also a list of things we needed to put aside money for. Based on how often and how much Brad got paid, I simply used a calculator and divided his paycheck accordingly.
The next step was to really get a concrete idea of how much money we really had. When you put all your money into electronic accounts and such, it becomes a very vague notion, and therefore easier to overspend. So rather than deposit his paycheck, Brad began to cash it.
He would bring the cash home to me, and I would literally sort it into the various piles I had worked out for our budget. I would work out how much money actually needed to go into the bank to pay bills, and would deposit only that amount. The rest I would sort into various labelled envelopes. We always saved 10%, which we converted into gold bullion to increase its value.
If we had a medical or vehicular emergency, we would draw it from this savings. If we wanted something, like a new computer, we would spend a lot of time discussing and researching it, finding the best price, then either save for it separately (by creating a new envelope for it) or also take that out of savings if we felt it was important enough.
So if I had debt, I would consider those bills separate from savings and wants, but I’d give each equal attention. Paying off debt and saving money is a lot more palatable if you are also not neglecting yourself.
Interesting post Tim. I don’t know what other’s do but I will tell you what we did. When my husband and I first married we had about $15,000 in debt which was all credit cards. We sat down with them and organized them and made a lovely database. We stopped using them and paid off the smallest one first since we could just out and do that with money we had. Then we applied the payment that would normally go to that card to the next one in the the line up and so forth. Using this method we paid off the debt in about 2 years and have not looked back.
Now about the needs part. Since we were paying off the debt with debt paying money we still had a small savings accruing (sp) for our needs and used that to pay for car repairs, new computers etc. We pay everything cash now. We have no credit cards but we do pay a car note which will be done in a few months and we are looking to buy a home (rent now) which we have been saving for.
We don’t try to become super rich or anything just be good stewards of what God has blessed us with. We tithe first to Him and He sees to our needs. Sometimes what we think we need we don’t and He shows us another way.
Dave Ramsey fan here, too. You have gotten a ton of good advice – but the piece of advice I’m going to give is this….. Do something. Don’t just hope that you can change, or wish you can change – Change. If the plan you have chosen to do isn’t working after 6 months, then change the plan a bit…but do something and start asap.
OK, one more thing – you should only follow one leader – choose one of the avenues mentioned by others, but don’t try to pick and choose the things you like from one and try to combine it with another — follow one path and only after following that path for awhile, will you know if it works for you.
Have A Great Day!
Kristin
great post! i look forward to reading all the responses and if you get anymore insights you might have to do a follow up post for all of us that are in the same boat.
you and kathy are the best! keep up the good work.
It’s hard, so hard.
We’ve been in a similar situation many times through the years. We dig out and end back in the hole. Looking back, we’ve realized that it is the credit card mentality that got us. Instead of living off of what we actually make, we live in the future. Buy now because we “need” it now and then count on future earnings. Of course this never works because the unexpected always happens and we have no money and have to charge that, too. In my mind there is nothing more defeating than paying interest each month on things that have already worn out or lost interest or been digested!
We are currently out of credit card debt (thank you, tax return) and our goal this year is not to use our credit card at all. We are trying to live on what is in the bank only. We set aside as much for savings as we can each month to build up a reserve for sure to come emergencies.
We would LOVE a laptop and it is so tempting just to go and get one. But, there goes that mentality again. Buy today and trust that in the future somehow the money will magically be there.
So we’ll wait on that one a while longer until there is more of a “cushion” in the savings. we won’t be using next year’s tax return to pay off our credit cards so maybe then:)
Blessings to you and your family as you sort it all through. It’s a lot of work, but you’ll get there.
Automatic transfer. My husband’s check is direct deposited into our checking account. Our bank offers a service called automatic transfer. On the day of the payroll deposit, they automatically transfer a set amount to our savings account. We only do $100 every two weeks, but we dont even miss it.
Also, we pay off our credit card every month! Even if we have to take from the savings account to do it.
Also, not smart but it works for us… we have too much tax money taken out, so we get several thousand dollars back each spring. This is used for tuition and the rest goes to large purchases, like furniture, or into savings.
I’m late to this thread. We are also Dave RAmsey fans. Our problem currently is two or three fold.
1. We tend to give way over budget each month. And we simply haven’t figured out how to curb that and feel good about it. ::snort::
2. We are debt free, have established an emergency fund….but with 9 children (2 working for a ministry – read doesn’t pay real well), 1 in college, 7 at home….we aren’t putting a thing aside for retirement….and Mike will retrie from the miltary in about 8 years.
We keep plodding away. We are scheduled for another “budget planning session” “soon”….I think the main thing is to get husband and wife on the same page – one goal and then attack it.
Oh Tax “refunds”, economic stimulus packages could probably wipe out that 5K debt and then you could save for that computer and have it in no time…..or we’ve been known to designate say 5 – 10% of such returns for something like a laptop and then put the rest on debt or savings. I suspect this year it will go to 1. a new commuter car or 2. retirement investments.
Gods grows us much in this area. I’ve begun to wonder if my “giving” has become a, well – hmm, a sort of substitute for the out of control spending I had 14 years ago……something to ponder and pray about. I have a really hard time budgeting “giving” – and obviously Mike does the same thing. LOL