Don’t Go Into Debt for Christmas

This year, it seems like Christmas advertising started the day after the kids went back to school.  For months, stores have been featuring Christmas decorations, trees, wreaths, lights and ideas for presents.

As a society, we seem to skip from one shopping season to another with no regard to the holiday we are celebrating.  Other than the meaningless rush to buy stuff there seems to be no reason for the Christmas holiday. We don’t even think about what we are really celebrating and what the holiday is all about. Unfortunately, this materialistic mindset has many parents worrying about how they will pay for Christmas this year.

According to CNN, two-thirds of them will spend more than they can afford, meaning many parents will take drastic measures to afford Christmas. Many of them will use credit cards for Christmas presents and go into debt which will take months to pay off. Others will take more extreme measures to fund their purchases:  11% will dip into their retirement account, 14% will use funds from their emergency savings, and 11% will take out a payday loan.

Funding short term purchases with anything other than cash can have harmful effects for years to come.  Paying off credit card debt for months means paying 15%-21% more for those presents once the interest charges are factored in. Using money withdrawn from a retirement account means a penalty on early withdrawals, lost interest and tax consequences. Raiding emergency funds for Christmas presents makes people more vulnerable when an actual emergency does occur. And using a payday loan for anything is a horrible idea. You will be paying an exorbitant interest rate plus a finance charge.  For a two week loan, the interest rate on a PayDay loan can be as much as 400% APR. 

Christmas should be about celebrating the birth of Christ, creating memories, and enjoying friends and family, not about creating debt. Christmas is a wonderful time of year, but it should not come at the risk of your long-term finances stability.

So, as you are getting ready for Christmas, here are some tips to avoid going into debt for the holiday season.

Begin by matching your budget to your Christmas list. You may want to buy gifts for every one of your family members, all of your co-workers, the tradespeople you deal with on a regular basis, and every neighbor up and down the street.  But can you really afford to do that?

It might seem harsh, but you don’t have to buy gifts for everyone. You can always make cookies for your neighbors or your children’s teachers. Or give them a small token gift card with a sincere thank you note about how they have touched your life.

Most times, a simple thoughtful gift means more to people than one more overpriced trinket that they don’t want and won’t use. Try to think of all the ways that you can show the people in your life how much you appreciate them without going into one penny of debt.

For many of us, being able to give a beautifully wrapped expensive store bought gift would be a nice way to make the people we care about feel special. But the reality is that we simply can’t afford to be Santa to everyone in our lives during the holidays.

If you’re from a large family, suggest that you each pick a name and only buy something for that person. A white elephant gift exchange is another way to do something fun and inexpensive. Each person brings one wrapped gift to contribute. (Be sure to indicate some parameters such as a dollar limit for the gift.) Have the gifts in a pile with everyone seated around the pile. Assign an order in which the gifts will be chosen. You can draw numbers from a hat or assign an order based on age. The first person gets to choose a gift from the pile, open it and show it around. Each person follows one at a time and when it’s their turn, they can choose to either pick an unwrapped gift from the pile or steal an open gift from someone else. Anyone who gets their gift stolen can do the same–choose a new gift or steal from someone else. This usually results in both chaos and fun.

Another way to save money is to window shop before buying. Start with your list of recipients and a budget for each of them. If you are doing online shopping, save items to your wish list for a few days before buying. If you are shopping in a brick and mortar store, walk through the store without your wallet or purse to scope out what you may want to buy. This helps you see what’s available that may be an appropriate gift in a slow thoughtful way. After your window shopping expedition, make a specific list of what you are going to buy for whom and return to the store or website to complete your purchases. This method helps you comparison shop, keeps you from buying things you have to return, ensures you remember everything and everybody and puts some sanity into what can be a chaotic rush to buy something – anything!

If you’re not sure how to rein yourself in when it comes to shopping for your kids, try using the Five Gift Rule.

1. Something they want

2. Something they need

3. Something to read

4. Something to wear

5. Something to share

It’s a great way to organize your gift giving without breaking your budget.

And let’s face it, how many times do the young ones have more fun with the huge cardboard boxes than with the toys. And kids don’t care how much you spent or whether it is brand new or from the thrift store. They don’t even notice that you spent hundreds of dollars to make sure they had the hottest gift of the year.

Take the stress away. You’re not a bad parent if you don’t spend $500 on each child. You’re not a bad parent if you bought them a bike at a garage sale and fixed it up. Kids remember Christmas because it’s a fun time of year. They remember it because they get to spend time with you, their parents. They get to eat cookies and sing fun Christmas carols. They aren’t going to count each gift and ask the price of everything under the tree.

So, avoid the inevitable financial pressure that comes each year at this time. Remember, going into debt for Christmas presents prevents you from reaching your long-term financial goals, like paying for your kids’ college tuition or funding your own retirement.

Every time you go into debt to buy a present, you’re choosing a physical object over your long term financial security. Try some of the above tips to stay on track and on budget this holiday season. It will still be merry and bright; and your future self will absolutely thank you.

 And remember what Pope Francis has said about money, “If money and material things become the center of our lives, they seize us and make us slaves.” This Christmas, escape from the slavery of debt and consumerism. Keep your eyes focused on Christ—the reason for this season—and not on all the unnecessary stuff our society throws at us.

For more on this topic, connect with the Compass Catholic podcast on Podbean as we discuss how to keep some sanity in Christmas spending.

Ditch the Debt!

If you are tired of paying interest or if you feel like there is an avalanche of debt coming your way, it’s easy to feel totally overwhelmed. But putting your head in the sand is no solution and ignoring debt can make things even worse.

Many types of debt destroy your future. Maxing out your credit card on vacations and luxuries isn’t going to help your financial situation. Buying a new car every few years ensures you will never get a car loan paid in full. And not paying bills on time will destroy your credit rating.

If you willingly take on debt, you are obligated to pay it back.  Romans 13:8 from several different Bible translations admonishes us “Owe nothing to anyone;” “Keep out of debt;” “Owe no man anything;” “Let love be your only debt;” “Don’t run up debts.”

Debt is a tool, and like any tool it needs to be used correctly. A hammer is a tool but you don’t use a hammer to kill a bug on a window. And you should not use debt to subsidize a lifestyle you can’t afford.

In looking at your personal debt, it helps to understand the difference between secured and unsecured debt. Secured debt is tied to a specific piece of collateral, such as your house or car. If you can’t pay the loan, the lender can seize this collateral to fulfill your debt obligation.

Unsecured debt (medical bills, past due bills on utilities, and money owed on credit cards) is solely based on your creditworthiness. A lender will approve unsecured debt, without any collateral to secure it, by reviewing your credit report and credit score.

If you are having problems making ends meet, it makes financial sense to prioritize the secured debt and pay that first. Falling behind on a credit card payment may ruin your credit score, but falling behind on your car payment may lead to your car being repossessed.

If you find yourself in a position where you have to prioritize debt payments, you will never recover without using a budget. It is the only way you can match your income against your expenses and find ways to bring them into balance.

A budget forces you to assess priorities and set limits while giving you the information you need to make smart decisions with your money. In general, you should use a budget to figure out places where you can cut back and save money. In addition to taking care of your basic needs, your budget should include a strategy for how much you can add to minimum debt payments and the order in which you want to pay off your debts.

Remember, that a budget is a tool and the success of a budget depends on how you use it. Writing down some numbers you pulled out of the sky is not a budget. Track your spending for a few months, categorize the spending and use that as your starting point for a realistic budget. Be sure to prioritize your debts and expenses, listing those that are essential to pay (like the mortgage, or the utility bill) and those that might be less important (such as department store charge cards or loans from family and friends).

A budget allows you to see if you are staying on track and making progress. Otherwise your finances are just guesswork, which is probably how you got into debt in the first place.

If you are seriously using a budget but can’t make any progress after a few months, you may need help from a credit counseling organization. If you do, check out the company’s credentials first. Not all agencies are legitimate—some charge excessive fees, fail to perform promised services, provide bad advice, don’t discuss alternative ways to deal with debt, make false promises, and sometimes even take your money and run. The federal Trade Commission website offers tips on how to choose a credit counseling agency: https://www.consumer.ftc.gov  and search for: choosing-credit-counselor.

You may be considering using a home equity line of credit (HELOC) to pay off your unsecured debt. Or you may consider debt consolidation, which is a loan used to pay off all of your debts at once. For many people, a HELOC or some sort of consolidation loan may seem like an easy fix. But the HELOC may put your home at risk if you don’t pay it on time and a consolidation loan can lead to more debt.

If you don’t make fundamental changes to your lifestyle you’ll be in debt again within a few years after securing these loans. They are an easy fix to the immediate problem but debt is just a symptom. The real problem is how you manage your money.

To solve the root cause of debt, you need to resolve the reasons you ran up so much debt in the first place. Are your expenses greater than your income? Is your spending irresponsible and impulsive? Do you live beyond your means?  Are you addicted to credit card spending sprees? Unless your lifestyle goes through a fundamental change, you will keep spinning in the debt cycle

To pay off debt, you only have two choices: spend less or earn more.

To spend less, think of potentially significant changes to your lifestyle. Can you manage on one car? Should you sell the house and downsize? Can you take on a roommate to help pay the mortgage? Are you willing to buy clothes at a consignment shop? What do you own that you can sell? Your biggest savings will come from lifestyle changes.

Similarly, if you want to earn more, maybe you need to change jobs. Or maybe it’s time to approach your boss with all the (well documented) reasons you deserve a raise and a promotion.

But be sure to weigh the difference between cutting expenses and making more money. For each $100 decrease in your spending you have $100 more for debt payments. For each $100 you earn, only a portion is available for debt payment because of taxes, payroll deductions and other expenses related to your job.

If you can’t seem to stay away from those little pieces of plastic that allow you to buy every whim, follow one of our strategies. Freeze your credit by putting the credit cards in a plastic bag, putting the plastic bag in a bowl, filling the bowl with water and putting the whole thing in the freezer. Or try plastic surgery by having your credit cards meet a nice sharp pair of scissors.  Another trick is to cover a cookie sheet with aluminum foil, add your credit cards, then put the cookie sheet in the oven at 3500.

The bottom line is that any time you are trying to change a habit it is a long process and a lot of hard work. Making a lasting lifestyle change won’t happen overnight.

While we do NOT encourage debt, some debts, such as a mortgage, student loan or business loans are hard to avoid. These three examples can be classified as ‘acceptable’ debt as they are appreciating assets. Homes usually appreciate in value. A student loan is assuming a higher salary after graduation. A business loan may allow you to expand your business and earn more. In these cases, debt is an investment in the future.

To help you stay focused, meditate on this verse from Proverb 22:7: “The rich rule over the poor and the borrower is slave to the lender.” All the hard work you will go through to pay off your debt and change your habits is the price you pay for the freedom that comes with being debt free.

Connect with us via our podcast on Podbean for more about how to dig your way out of debt.

It Takes Extraordinary Effort to Get Out of Debt

So many people who are in debt are looking for a quick fix.  They think taking out a consolidation loan, or even worse using a home equity line of credit to pay off debt will free them. Unfortunately, all a quick fix does is put a band-aid on a place where you need major surgery.

In addressing credit card debt, an important starting point is to define how and why you are currently using your credit cards. If you are having problems making credit card payments, but you haven’t stopped using your credit cards, there really is no debt consolidation loan that will help you.

Yes, you may be able to lower your total monthly payments, but if you are still buying items and not paying the balance in full each month, you will just increase your debt more and more each month.

Using a home equity loan to payoff credit card debt is also a very bad idea. If you fail to make payments on the home equity loan, you could lose your house.  If you fail to make payments on credit card debt you might be forced into bankruptcy, but you won’t lose your home. So, using the equity in your home to pay credit card debt is very risky.

If you are looking for a way out of the debt cycle, there are several things to do immediately:

  1. STOP using your credit cards for any reason.
  2. Begin tracking every single penny you spend—even if it’s just $0.50 for a piece of gum. This will help you figure out what spending is absolutely necessary and what is not.
  3. Do not get another credit card “for emergencies!” Begin saving money in an emergency fund. It may sound crazy if you are already having trouble, but only pay the minimum amount on your credit cards until you have saved $1000 in an emergency fund.

Remember the definition of emergency —”a serious, unexpected, and often dangerous situation requiring immediate action.”  Do not use your emergency fund for anything that doesn’t meet the definition of an emergency!

  1. Start managing your money using a spending plan! You already know how much money you have to spend each month—the net amount you receive from all sources of income. Design your spending plan around that amount of money. If something isn’t in the spending plan, then you can’t buy it.

This may all sound like gloom and doom, but it’s not. It’s hard work, attention to detail and a commitment to get out of debt. I know. We did it!

You can accomplish almost anything if you are willing to sacrifice. Sacrifice—that’s a good “Catholic” word, isn’t it? If you want something badly enough, you should be willing to sacrifice for it. And therein lies the problem! It is hard, it’s not fun and it takes a long time—in other words, it takes sacrifice to get out of debt.

We had a couple come to us who had over $120,000 of credit card debt. They really wanted to get out of debt, so they applied extraordinary effort for about 4 years. They started their journey by applying the story of the Widow and the Oil (2 Kings 4) to their personal circumstances.

In this Bible story, Elisha asks the Widow “what do you have?”  This couple did the same thing—they looked at what they had, and found that they had cash value in a life insurance policy. They still needed to have life insurance, but the cost of their cash value policy was so high, they were underinsured.  So they took the cash value of their insurance and applied it to their debt. They also bought a term life insurance policy which gave them more coverage at a fraction of the cost. That one change paid off about $20,000 of debt real fast!

Next, they started tracking every single penny they were spending and found that they were spending money on things that were not necessary. They immediately adjusted their spending habits.

At the same time, they created a spending plan and stuck to it. Part of their spending plan was a debt snowball. Any extra money (no matter how little) was paid on their smallest credit card debt, while they made minimum payments on their other credit cards. Once the smallest credit card was paid off, they tackled the next smallest one and just kept repeating the process.

After about 4 years of extraordinary effort, they had paid off over $70,000 of the $122,000 in credit card debt!

They didn’t cross their fingers. They didn’t sit there and hope their debt would go away. They did not take out a consolidation loan or a home equity line of credit. They worked hard and made it happen.

Here is another good Catholic word: fasting. We usually only hear this word when we think of our Lenten practice of fasting on Fridays or fasting from a particular item during Lent.  Think about what we do during Lent when we fast. One big meal and two smaller meals that would equal one meal. We abstain from eating certain foods.

But what about a spending fast? Could you go a whole week without spending any money? There would be no stopping at the grocery, or the big box store, or even the gas station on a spending fast! Instead of running to the grocery store on a regular basis, could you make meals from what you have in the pantry?

Is it possible to turn your fasting week into a fasting month? Could you go a whole month without eating out or fast food meals, spending money on entertainment, buying any clothes? Can you limit car trips to a round trip to and from work only?

What would happen in one month if you expended this extraordinary effort? Can you set an aggressive goal for saving and paying off debt in a month’s time?

Set a savings goal. Set a debt payoff strategy and GO FOR IT! The extraordinary effort will pay off in so many ways.  You will see how little you really need to survive and you can revise your spending habits in ways you never dreamed were possible.

THIS IS A CHALLENGE FOR A ONE MONTH SPENDING FAST!  

Send us an email to mailto:info@compasscatholic.org. and let us know how your extraordinary effort paid off.

8 Tips for Dealing With Debt Overload

If you are tired of paying interest or when there is an avalanche of debt coming your way, it’s easy to feel totally overwhelmed. But putting your head in the sand is no solution and ignoring debt can make things even worse. Here are some tips to keep you focused and help you slowly recover from debt overload.

While we do NOT encourage debt, some debts, such as a mortgage, student loan or business loan are hard to avoid. These three examples can be classified as ‘acceptable’ debt as they are appreciating assets. Homes usually appreciate in value. A student loan is assuming a higher salary after graduation. A business loan may allow you to expand your business and earn more. In these cases, debt is an investment in the future.

Many other types of debt destroy your future. Maxing out your credit card on vacations and luxuries isn’t going to help your financial situation. Buying a new car every few years ensures you will never get a car loan paid in full. And not paying bills on time will destroy your credit rating.

Because we have willingly taken on debt, we are obligated to pay it back. Romans 13:8 from several different Bible translations admonishes us “Owe nothing to anyone;” “Keep out of debt;” “Owe no man anything;” “Let love be your only debt;” “Don’t run up debts.”

Debt is a tool, and like any tool, what matters is how you use it. A hammer is a tool but you don’t use a hammer to kill a bug on a window. And you should not use debt to subsidize a lifestyle you cannot afford.

In looking at your personal debt, it helps to understand the difference between secured and unsecured debt. Secured debt is tied to a specific piece of collateral, such as your house or car. If you can’t pay the loan, the lender can seize this collateral to fulfill your debt obligation.

Unsecured debt (medical bills, past due bills on utilities, and money owed on credit cards) is solely based on your creditworthiness. A lender will approve unsecured debt by reviewing your credit report and credit score without any collateral to secure the debt.

If you are having problems making ends meet, it makes financial sense to prioritize the secured debt and pay that first. Falling behind on a credit card payment may ruin your credit score, but falling behind on your car payment may lead to your car being repossessed.

If you find yourself in a position where you have to prioritize debt payments, you will never recover without using a budget. It is the only way you can match your income against your expenses and find ways to bring them into balance.

A budget forces you to assess priorities and set limits while giving you the information you need to make smart decisions with your money. In general, you should use a budget to figure out places where you can cut back and save money. Your budget needs to include a strategy for how much you can add to minimum debt payments and the order in which you want to pay off your debts.

Remember, that a budget is another tool and the success of a budget depends on how you use it. Writing down some numbers you pulled out of the sky is not a budget. Track your spending for a few months, categorize the spending and use that as your starting point for a realistic budget. Be sure to prioritize your debts and expenses, listing those that are essential to pay (like the mortgage, or the utility bill) and those that might be less important (such as department store charge cards or loans from family and friends).

A budget allows you to see if you are staying on track and making progress. Otherwise your finances are just guesswork, which is probably how you got into debt in the first place.
If you are seriously using a budget but can’t make any progress after a few months, you may need help from a credit counseling organization. If you do, check out the company’s credentials first. Not all agencies are legitimate—some charge excessive fees, fail to perform promised services, provide bad advice, don’t discuss alternative ways to deal with debt, make false promises, and sometimes even take your money and run. The federal Trade Commission website offers tips on how to choose a credit counseling agency: https://www.consumer.ftc.gov And search for: choosing-credit-counselor.

You may be considering using a home equity line of credit (HELOC) to pay off your unsecured debt. Or you may consider debt consolidation, which is a loan used to pay off all of your debts at once. For many people, a HELOC or some sort of consolidation loan may seem like an easy fix. But the HELOC may put your home at risk if you don’t pay it on time and a consolidation loan can lead to more debt.

If you don’t make fundamental changes to your lifestyle you’ll be in debt again within a few years after securing these loans. They are an easy fix to the immediate problem but debt is just a symptom. The real problem is how you manage your money.

To solve the root cause of debt, you need to resolve the reasons you ran up so much debt in the first place. Is your spending irresponsible and impulsive? Do you live beyond your means? Are you addicted to credit card spending sprees? Unless your lifestyle goes through a fundamental change, you will keep spinning in the debt cycle

To pay off debt, you only have two choices: spend less or earn more.

To spend less, think of potentially significant changes to your lifestyle. Can you manage on one car? Should you sell the house and downsize? Can you take on a roommate to help pay the mortgage? Are you willing to buy clothes at a consignment shop? What do you own that you can sell? Your biggest savings will come from lifestyle decisions.

Similarly, if you want to earn more, maybe you need to change jobs. Or maybe it’s time to approach your boss with all the (well documented) reasons you deserve a raise and a promotion.
But be sure to weigh the difference between cutting expenses and making more money. For each $100 decrease in your spending you have $100 more for debt payments. For each $100 you earn only a portion is available for debt payment because of taxes, payroll deductions and increased expenses related to your job.

As you start to make progress paying down debts, don’t backslide by rewarding yourself with additional spending. You’re digging a deeper hole for yourself and making it exponentially harder to become debt-free.

If you can’t seem to stay away from those little pieces of plastic that allow you to buy every whim, follow one of our strategies. Freeze your credit by putting the credit cards in a plastic bag, putting the plastic bag in a bowl, filling the bowl with water and putting the whole thing in the freezer. Or try plastic surgery by having your credit cards meet a nice sharp pair of scissors. Another trick is to put your credit cards on a cookie sheet covered in aluminum foil, then put the cookie sheet in the oven at 3500.

The bottom line is that any time you are trying to change a habit it is a long process and a lot of hard work. Making a lasting lifestyle change won’t happen overnight.

To help you stay focused, meditate on this verse from Proverb 22:7: “The rich rule over the poor and the borrower is slave to the lender.” All the hard work you will go through to pay off your debt and change your habits is the price you pay for the freedom that comes with being debt free.

Connect with us via podcast on Breadbox Media and listen to more about how to dig your way out of debt.

Debt is Not Your Friend

Debt seems to be a way of life in modern day America. We have mortgages, car payments, credit cards, home equity lines of credit, second mortgages, student loans, loans from relatives, bank overdraft charges, payday loans and past due bills.

That mountain of debt is ruining families and marriages. We have talked to so many people who are struggling with debt and overspending in various forms. When we drive through neighborhoods, we see beautiful homes on the outside that are wracked with pain and trouble on the inside due to mountains of debt.

We know how that feels, because we were once in that position with a mortgage, two car loans, a ton of credit card debt and no savings. It is not a nice place to be.

It was only by learning and applying with the Bible teaches that we were able to dig ourselves out of the hole, control our spending, pay off the debt and save for the future. It wasn’t fun at first. In face it was a very painful transition. I remember times when date night was taking a walk in the neighborhood park. And a really fancy date night was topping off the night with an ice cream cone.

But working together on a common goal that was beyond challenging made us stronger as a couple. And using Scripture and our faith as the guidepost for that goal gave us the strength to persevere.

Scripture does not call debt a sin, but it does strongly discourage us from being in debt. Proverbs 22:7 tells us that “The rich rule over the poor, and the borrower is the slave of the lender.” If you don’t think you are a slave to debt, try missing a few payments and see how much of a slave you are to your lenders.

When we are in debt, we are truly a slave to the lender and the deeper in debt we are, the more enslaved we become. Debt means we have no freedom to decide where or how to spend money as it is already obligated to meet our debt payments.

In the Old Testament, being out of debt was one of the promised rewards for obedience.

“If you continue to heed the voice of the LORD, your God, and are careful to observe all his commandments which I enjoin on you today, the LORD, your God, will raise you high above all the nations of the earth. When you hearken to the voice of the LORD, your God, all these blessings will come upon you…. you will lend to many nations and borrow from none.” (Deuteronomy 28:1-2, 12)

On the other hand, debt was listed among the curses for disobedience. “If you do not hearken to the voice of the LORD, your God, and are not careful to observe all his commandments, which I enjoin on you today, all these curses shall come upon you and overwhelm you…. The alien residing among you will rise higher and higher above you, while you sink lower and lower. He will lend to you, not you to him. He will become the head, you the tail.” (Deuteronomy 28:15, 43-44)

When we get into debt, we’re assuming that we will earn enough in the future to repay it. But can we really assume such a thing? The Bible strongly cautions us against such presumption: “You who say, ‘Today or tomorrow we shall go into such and such a town, spend a year there doing business, and make a profit’ — you have no idea what your life will be like tomorrow…. Instead you should say, ‘If the Lord wills it, we shall live to do this or that.’” (James 4:13-15)

Most people slowly slide into debt and it’s easy to do. It’s overspending on Christmas or vacations. It’s not having an emergency fund and using the credit card when there’s no money in the savings account to cover unplanned expenses. It’s getting laid off or having a medical emergency. It’s any number of things that happen to all of us. The problem is that each penny of debt results in having to pay interest on the debt.

Sirach 20:11 is the perfect verse for the results of debt, “A man may buy much for little, but pay for it seven times over.”

The typical American family has about $15,000 in credit card debt. Assuming they are paying the typical interest rate of 18%, they are spending $225/month in interest or $2,700 a year in interest only. And that’s just on credit cards. It does not count interest on the mortgage, car loans, student loans, past due bills, etc., etc.

Think of how much that $2,700 adds up over time. In 20 years, the number will balloon to $54,000 in interest payments. Without paying interest on debt, that’s $54,000 that could have been saved.
Looking at the opposite side of PAYING interest is EARNING interest. Take the same $225 paid on credit card interest and save it each month for 20 years. At the end of 20 years, at 2% interest you’ll have almost $70,000 in your savings. Higher interest rate on your savings will grow that nest egg even further.

Paying interest is just throwing away money. That $2,700 in interest a year is like throwing away $8.00 each and every day for 20 years. It adds up to a lot of money!!!

In the meantime, whatever was bought on credit is probably lost, used up or no longer valid by the time the credit card is paid off.

Many people raise their lifestyle through debt, only to discover that the burden of debt then controls their lifestyle.

If you are trying to get ahead, build up savings for college, or a home, or retirement, paying interest is not going to help you get there. If you think you don’t have enough money to save $225 each month, how can you possibly be paying $225 in interest payments?

Debt is definitely not your friend!

A Leaky Budget

pipe-159671_640A “leak” is defined as something escaping through a hole. So a budget leak means you have money escaping through a hole in your budget.
A budget leak can have many sources. It’s spending money on the same things over and over again without even thinking about how or why you are spending that way. It might be any money spent on things you don’t really need with no conscious thought. It could also be increased costs on items bought regularly.

Finding and plugging those budget leaks is part of being a good steward. Luke 16:11 tells us “If you have not been faithful in the use of worldly wealth, who will entrust you with true riches?” Spending money responsibly helps you be faithful in using worldly wealth. Today I’ll share some ideas about finding and plugging budget leaks.

We were on a discounted cell phone plan which expired in January. The February bill was quite a shocker as the bottom line increased over $50. We made a visit to our cell phone provider who reduced the fee immediately. It would have been easy to shrug our shoulders and just figure that the increase was part of doing business but by being proactive we were able to save $50/month which adds up to $600/year–not a drop in the bucket!!

If your phone bill has increased recently, talk to your provider and ask for a better rate, especially if you have been a good customer. If possible, switch to a lower-cost plan or even a cheaper service provider. Cellphone service is a competitive market with lots of options so be sure to explore all options available to you.

We live in Florida and the drafty windows and attic insulation are just as much a problem here as they are in areas further north. Most of the homes in our area use a heat pump, which does not blow warm air, so any air leaks and drafts seem to magnify the already cool air in the house during the winter. A few years ago, we replaced the single pane windows with double pane windows and also had more insulation blown into the attic. While it wasn’t cheap, we estimate that our electric bills have decreased by 15-25%. More money that’s not leaking out of the budget.

Creeping prices are another area where money leaks. One of the benefits of using a budget is that you have historic information on prices you pay for services, such as lawn care, the bug guy, or haircuts. As you monitor these costs it allows you to see where prices have increased substantially over a short period of time. When we did our last budget review we noticed that the prices for my haircut had increased substantially over the last 18 months. Time to find a new hairdresser because the prices have increased beyond what I choose to pay for that service.

Expensive name brand products are another way money disappears. Many generic brands are every bit as good as the name brands. If you are thinking of trying the generics, compare the labels before making your final decision just to see if there is a significant difference in ingredients. If I want to try a generic brand, I’ll buy the smallest size possible and try it for a few days before making a decision to buy the larger size. Many times a blind test reveals there is not a difference, but when we look at the name brand labels, we perceive a quality difference which may or may not exist. If you are going to stick with name brand products, know the target price you are willing to pay, use coupons and only buy them when they are on sale.

The next budget leak we are going to tackle is cable TV. We are defining the specific shows we enjoy watching, then looking for the various ways we can access them to figure out which services provide what we watch at the lowest price. The cable bill has risen astronomically so we are using the free one-month trial subscriptions to various streaming services to figure out which is right for us. It is definitely time to cut the cord on cable TV!

I love to read and it’s far too easy for me to spend money on books, even if I shop at the used bookstore. I know I can borrow free books at the library, but getting there is another matter. Plus, with all the ministry travel we do, I find it easier to read on my tablet rather than lugging around books. BookBub is a new site I discovered that sends out daily email with books that are free or less than $2.99. When you signup, you can choose the types of books (historical, fiction, Christian, etc.) and the authors you prefer. Then you will get a daily email listing the free or discounted books that meet your selection criteria. I’ve enjoyed this service because it’s given me access to free books by new authors as well as authors I already prefer. And since I only download the free books, I don’t waste money if I choose an eBook, then decide to delete it after reading a few pages.

Paying bank fees is another huge budget leak. Many banks offer free services based on direct deposit or having a specific amount in your savings account. Search the internet for banks near your home or office to determine if their free account offerings suit your banking style. Stick with in-network ATMs or get cash when you use your debit card at the grocery checkout. And a HUGE leak is paying overdraft fees. Account fees range between $7-$25 per month and overdraft fees range between $35-$71 per overdraft. If you are paying these fees you can stop a huge leak by analyzing your banking charges and doing everything you can cut the fees. I know we’ve saved hundreds of dollars by never overdrawing and not paying monthly account fees.

Food and drinks are another area where money can trickle through your fingers at an alarming rate. I don’t really enjoy cooking so it’s easy to justify takeout on those days when we are busy. However, by looking at the calendar each week and figuring out which days are likely to be busy, I can plan ahead and make meals that create leftovers to be used on the nights I know I won’t feel like cooking.
We know a couple where the wife is addicted to fancy coffee. She gets one everyday on the way to work, and on the weekends her husband goes to the coffee shop for her. She always gets the largest size, which costs about $5.00. That’s $35/week; $140/month and $1,820/year. Making coffee at home is considerably cheaper!

Paying attention to what, when, why and how much you spend allows you to plug those pesky budget leaks before they become full scale gushers.

Ordinary Time

Sunday January 10th marks the Liturgical transition from Christmas Time to Ordinary Time. We have completed the great celebration of Our Lord’s birth and we now move into a time of reflecting on His life, and his teachings.

One of the optional readings for Sunday was Titus 2:11-12: “For the grace of God has appeared, saving all and training us to reject godless ways and worldly desires and to live temperately, justly, and devoutly in this age,”

The “godless ways and worldly desires” can often be traced back to overspending during the holidays. It is so easy to get caught up in Christmas spending. Everybody is celebrating, you want to give your kids everything their hearts desire, all the relatives are exchanging gifts, your friends and neighbors are dropping by with goodies and before you know it, here you are again with a mountain of bills to pay.

Now that Christmas is over, and the spending spree is complete, are you back to your own personal ordinary time where the pressure of those Christmas bills will be with you till Advent of 2016 when the overspending starts again?

I don’t think this is how Jesus would have us celebrate his birth or the ay he wants us to live.

If you are trying to do a better job of managing your money or if you are facing financial challenges this year, here are some verses to help you concentrate on changes you want to make, while at the same time increasing your prayer life and time with God.

GETTING OUT OF DEBT:
Proverbs 22:7 is a great verse for meditation if you are trying to get out of debt: “The rich rule over the poor and the borrower is the slave of the lender.” Being in debt, does put you into a position of slavery and if you don’t think you are a slave, try missing a payment. You’ll be surprised at how fast your interest rate is increased and the late charges are added to your account. As the borrower you are enslaved to the lender’s terms and conditions. Figure out how long it will be till you are debt free to determine the length of your slavery.

PAYING OFF A SPECIFIC LOAN:
Sirach 20:11 is perfect if paying off a specific loan is on your list of resolutions. “There is one who buys much for little, but pays for it seven times over.” Many people happily put purchases on a credit card, but rarely figure out the total cost of the purchase when the interest charges are included with the purchase price. And if you miss any payments and incur a late fee, the cost of that item skyrockets.

In fact, depending on your interest rate, you can pay more than twice as much for an item by making only the minimum payment on a credit card. Figure out the amount of money you are wasting paying interest. Are you “paying for something seven times over?”

SAVING:
A resolution to save more money, leads to Proverbs 21:20, which tells us: “Precious treasure and oil are in the house of the wise, but the fool consumes them.” Too often we spend everything we make and savings can be an after thought rather than a priority.

Spending first means there will never be enough money to save and unexpected expenses can cause you to go further in debt. Having an emergency fund keeps you from using those plastic cards when emergencies come up – like needing a new tire or having the washer repaired.

OVERSPENDING:
To stop overspending, consider 1 Timothy 6:10: “For the love of money is the root of all evils.” When we overspend it can be due to using money as a form of gratification. The satisfaction, fun, fulfillment and short term happiness we get from spending can quickly turn into idolatry if our spending habits overwhelm us.

Develop a budget (aka spending plan) to help you to understand where your money goes. It’s the only way to gather enough facts to see if you are spending it on what is most important to you. Are you wasting money or using it wisely?

GIVING:
Acts 20:35 is my favorite verse for giving: “Remember the words of the Lord Jesus, who said it is more blessed to give than to receive.”

Giving increases around Thanksgiving and Christmas as it is a natural thing to do at that time of year. What about ordinary time? Are you charitable when the focus is off of being generous?

Every year my husband and I analyze where we are giving, how much and how often. Being generous sounds counter-intuitive if you are trying to get your finances straightened out, but it is impossible to out give God.

I am NOT saying that you give to get. I am saying that giving should be a first priority for our finances. It is an important way for us to consciously recognize that God owns everything and we are his stewards. This concept is the foundation of all your other financial planning.

If you are feeling overwhelmed by reading this, check out the Compass Map. It is a good way to break down your finances into small pieces and tackle things one at a time.

One of the most helpful ways we’ve seen people change their finances is by taking the Compass Catholic Navigating Your Finances God’s Way Bible study.

If you don’t know if your parish has Compass or if you want to get a small group started at your church – call us. And remember it’s available in both Spanish and English.

One of the most frequent things we hear from people who have taken the Bible Study is “I wish I had learned this earlier.” People who are young or old all say this – so there is no time like the present to learn what God has to say about managing money his way.

Our prayer for you this year is to relieve yourself from financial burdens and to honor God in the way you spend, save and manage your finances. A godly attitude toward money is a great resolution for 2016, and there is no better way to keep a resolution that to wrap it in the word of God.

Maybe this is the year when your ordinary time becomes extraordinary!

Driving Debt Free Cars

The purpose of owning a car is to provide you and your family with safe reliable transportation. Yet how many car commercials focus on those aspects of owning a car? Instead they focus on how sexy the owners are, how luxurious the car is, how other people will envy you if you choose the car they are selling. In short, most of the car commercials don’t even acknowledge safe and reliable transportation as a reason to buy what they are selling.

Yet spending more than you need to on a car can do some severe damage to the family finances. After home mortgages, car loans are the largest debts most people have. And more than 70 percent of all the cars on the road are financed. Everybody likes the new car small – but it comes at a high cost. Did you know a new car loses 40% of its value in the first year, and 60% by the 4th year.  In other words, a new $28,000 car will lose about $17,000 of value the first four years you own it.

You could get the same results by tossing a $100 bill out the car window once a week for over 3 years! Car debt is one of the biggest roadblocks for people on their journey to true financial freedom.

Unlike a home, which usually appreciates in value, the moment you drive a car off the lot it depreciates in value. It’s worth less than you paid for it by the time you hit the first intersection. The depreciation is especially dangerous because most people never get out of car debt. Just when they get to the point of paying off a car, they trade it in and purchase a newer one with credit.

You can follow 3 steps to get out of never ending car payments:

  1. Decide to keep you car a minimum of 3 years longer than your car loan.
  2. After your final payment, keep making the same payment to yourself.  Put the money into an account that you will use to buy your next car.
  3. When you are ready to replace your car, the trade-in, plus your 3 years of savings should be sufficient to buy a good used car without a loan.

Lots of people get confused between the function of a car, which is to take you from Point A to Point B and the status of driving a new car.  In 1 John 2:15 we hear “Do not love the world, not the things in the world.”  Often times loving the things of this world influence our buying habits too much.

Besides being budget-friendly, there are other reasons to choose a used car rather than a new one. Today’s vehicles are designed to run for many more miles than the models of years past. Because of that, car shoppers can buy a quality vehicle, even a luxury car, with lots of extras that might not be affordable to them brand new.

As you begin to contemplate purchasing a used car, you’ll need to take into account how the vehicle will be used. If your family has outgrown the sedan, you may want to consider a minivan. If your job or choice of recreation dictates off-road capabilities, you may want to consider a truck or SUV.

In addition to deciding which type of vehicle you need, you should also write up a list of car options you simply can’t live without. Such items may include features such as an automatic transmission; power steering and brakes; good gas mileage; or adjustable seats. It will also be helpful to write up a second list of options that would be nice to have if you happen to run into a vehicle that comes equipped with those features, but would not be a deal breaker should they not be included. Some of those features could include: body style, color preference, air conditioning, cruise control, and sound systems.

After you have saved up enough money to cover the price range of the used car you have in mind, be sure to factor in the expenses that you may not have considered such as title transfer and registration fees, and in some states, smog or emissions certification. In addition, your insurance rates may be affected; check with your current agent or online to get a quote. If you plan to buy an older car, or are willing to buy a car that may need maintenance or repairs right away, set up a special fund for those probable expenses.

Once you determine how much money you can spend on purchasing a used vehicle, it is time to start the next step to car ownership which is to do some research. Talk to family, friends and co-workers to see which vehicles they have been happy with in the past.  Proverbs 20:18 tells us “Plans made with advice succeed; with wise direction wage your war.” While buying a used car is not necessarily waging war, the advice of friends and relatives is invaluable in researching both cars and car dealers.

While their experiences (good and bad) are purely anecdotal, they may help you decide which make or model might work best for you.

As your mind opens up to the process of buying a used car, you’ll begin to notice cars on the street that you have overlooked before. Make some mental notes on which makes, models, and years of the cars particularly catch your eye. By this time, you should have a pretty good idea of the style of car you are shopping for.

Another good place to do research is in the local newspaper or auto trade magazines to see what the market is like out there, and your computer can be a useful tool as well.  Typing in “used car” into a search engine will bring up reams of sites that will show cars for sale, or articles on a wide variety of techniques to help you buy a car. Take a look at the general types of vehicles currently for sale, what features are available on what makes and models, and what kinds of vehicles you can afford.

Here are some of the best places to shop for cars on the Web:

  • Edmunds.com lets buyers shop for used cars and once buyers choose a car and trim level, they can see the average price paid for that car in their area and get an estimated price from Edmunds.
  • Cars.com, connects shoppers to dealers who offer a quote;
  • U.S. News Best Cars, which ranks cars and tracks deals;
  • Kelley Blue Book, determines a price buyers should expect to pay based on local demand, seasonal trends and other factors.

Spending some serious time at this stage of the process is important to making an informed decision on what type of car you’ll be narrowing your search for, so don’t skimp on the time you dedicate toward your future vehicle.

When you find one car for sale that you are specifically interested in, be sure to hone in on information regarding that make and model. Request that the seller provide you with the Vehicle Registration Number (VIN) for that car. Each car manufactured is issued its unique VIN and the records of that vehicle follow it throughout its lifetime. For a minimal fee, online services can locate the records for that particular car and send its vehicle history report to you.

The type of information you will receive is: if the car has a clear title; if the car has been salvaged; if the car has been involved in a serious accident; how many times the car has been sold; the original sale date; and if there have been any recalls for that car. Investing in a VIN search can save you a lot of headaches (and money) down the road.

So what is the bottom line impact of driving debt free cars? The average car payment is about $375/month.  If a 21 year old drives a debt free car and saves the $375 monthly payment, by the time they are 65, they will have saved over $1.3Million!!  ($375 at 7% for 44 years)

It’s all about staying out of debt and focusing on the real reason for owning a car – to get you from point A to point B safely and reliably!

Ditch the Debt

The dictionary defines debt as “money that a person is obligated to pay to another.”  Debt includes money owed to credit card companies; the home mortgage; car loans, bank loans; money borrowed from relatives; past-due bills and anything you’ve co-signed for.

Scripture does not call debt a sin, but it does strongly discourage us from being in debt. “The rich rule over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7)  When we are in debt, we are enslaved to the lender.  If you don’t think your debt makes you a slave, try missing a few payments and see what happens. The deeper in debt we are, the more like slaves we become.  Debt means we have no freedom to decide where to spend our money because the money we earn is obligated to meet our debt payments.

When we get into debt, we’re assuming that we will earn enough in the future to repay it. But can we really assume such a thing? We plan for our jobs to continue or our investments to be profitable, but the Bible strongly cautions us against such presumption: “You who say, ‘Today or tomorrow we shall go into such and such a town, spend a year there doing business, and make a profit’—you have no idea what your life will be like tomorrow … Instead you should say, ‘If the Lord wills it, we shall live to do this or that.’” (James 4:13-15)

Let’s look at the dollars and cents of the debt payments for a typical family. If the family has $5,560 in credit card debt at 18% interest rate, and they are paying the interest only, with no payment on the principle balance, the interest payments alone cost $1,000/year EVERY YEAR!  And using the minimum payment method, it will take them almost 8 years to pay off the credit card, if they do not charge any more to it.

Paying interest is money that’s just being thrown away. In the meantime, whatever was purchased using the credit card is probably lost, used up or no longer valid by the time the credit card is paid in full. Read this verse from Sirach 20:11: “A man may buy much for little, but pay for it seven times over.”  Many people raise their lifestyle through debt, only to discover that the burden of debt controls their lifestyle.

We get so caught up in what we don’t have and what we want, that maybe the best thing is to not have so much. Nothing in our secular culture encourages us to be content with what we already have.  The American media is constantly barraging us with messages to make us discontent, otherwise we won’t buy anything. It’s a proven fact that the more TV you watch or the more you surf the web, the more you will buy. The more you look at catalogs and magazines, the more you buy. And the more you shop the more you spend. And if you use that little plastic card when you shop, it is very likely you will spend 37% more than if you paid cash.

If you have a $50 budget for whatever you need to buy and if all you have is $50 cash in your wallet, it limits your spending–you can’t spend more than $50 or you’ll be in trouble. But with a credit card, it’s no problem to go over budget. There is no incentive to stick to a budget when you are using credit cards.

And cosigning is every bit as hazardous to your financial health as your own debt. When a friend or relative tries to get a loan and their credit is not good, the lending institution will require a cosigner. When you cosign a loan you are agreeing to pay the loan if the person you cosigned for does not pay. You are legally responsible for the debt.  By cosigning, you have promised to pay off the entire loan if the borrower does not pay.

Statistically, cosigners usually end up paying. Proverbs 17:18 says “Senseless is the man who gives his hand in pledge and who becomes surety for his neighbor.” So the Bible is telling us that we have no sense if we co-sign. Rather than the original borrower paying their own loan, the statistics indicate that the cosigner will most likely end up paying for the loan.

Here’s what also happens. When you cosign a loan it gets listed on your credit report. Therefore if the borrower pays 30 days late, you’ll see it on your credit report. You’ll get a negative hit against your credit score for their late payment. One thing most people do not consider when they are co-signing is that if the borrower defaults, your credit could be affected for at least seven years.

So before cosigning, think twice. If you’re considering cosigning, meditate on this verse from Sirach 29:17 “Going surety has ruined many who were prosperous and tossed them about like waves of the sea.” If the original borrower defaults you will be paying for something you don’t own, the relationship with the other person has probably been ruined and your credit has been wrecked through a situation you could not control.

Doesn’t really sound like a very good deal, does it?

We all face financial challenges at some point in our lives and just paying the day-to-day bills can be overwhelming. It seems like the only way to survive financially is to use credit. Sometimes we dream and pray to win the lottery as an answer to financial challenges.  But how often do we pray to God for wisdom in handling our finances on a daily basis?

We need to get into the habit of going to our knees any time we are facing challenges, even as it applies to our finances.

Evelyn

Teaching Kids Dollars and Nonsense

wealth-69525_1280A recent article from the Washington Post by Amy Joyce was titled “Teaching Kids Dollars and Sense.” In the article Ms. Joyce quotes Ron Lieber, who authored the book The Opposite of Spoiled: Raising Kids who are Grounded, Generous and Smart About Money.

I have not read the book and don’t know anything about it, as I am only commenting on the article. Most of what Ms. Joyce wrote was spot on, such as: start early; it’s the parent’s responsibility to teach their children about money; let the kids suffer the consequences of a bad financial decision when they are young; use three jars marked give, save and spend to develop a kid friendly budgeting system, etc.

But one of the things I heartily disagree with was that we can feel good about ourselves if we have “a little left over for charity.” We’ll never have enough left over for charity. This attitude is inappropriate for adults and unattainable for kids. The first words a toddler usually learns are Mama, Dada and MINE!

Kids are not natural givers. In our consumer society where children are walking bill boards with their character based, book bags, lunchboxes, shirts, dresses, shoes pj’s and underwear, no child will be naturally generous because everything in our culture influences them to be selfish. Children will only be generous with money if the parents intentionally teach them to be generous.

Google the words “children and generosity” and you will get about 35 million results in nano-seconds, most of which use words such as teach, learn, lesson, activities, raising, developing, growing, engaging, fostering, cultivating, helping, nurturing. None of these words make generosity sound like an automatic way kids think, do they?

If we want our children to be generous, we need to teach them to be generous, and the best way to do that is to be generous ourselves. We often hold money tightly grasped in our hands as if our very life depends on it. But the Bible tells us that all the money and possessions we hold onto so tightly really does not belong to us–they belongs to God.

God owns everything. Think about that for a minute. The Bible tells us that God owns everything: the highest heavens (Dueteronomy 10:14); the world and all that is in it (Psalm 24:1); all the land (Leviticus 25:23); all the silver and gold (Haggai 2:8) all the animal, cattle, wild birds all living things in the field (Psalm 50:10-12); all the earth Exodus (19:5); all of life (Ezekiel 18:4).

Boiling it down to the smallest possible denominator, what do you have that does not have God as its source? Your job? God gave you the talents and gifts you use in your work. Your life? God is the source of all life. Your health? Your family? Friends? Everything you have comes from God!

Once you recognize God owns everything, it’s easy to become generous. It’s not how much of your money you have to give to God. The real question is how much of God’s money do you need to keep.

1 Chronicles 16:28 tells us “Give to the Lord, you families of nations, give to the Lord glory and might.”

Proverbs 25:21 tells us to be generous to our enemies “If your enemies are hungry, give them food to eat, if thirsty, give something to drink.”

Tobit 4:8 challenges us to “Give in proportion to what you own. If you have great wealth, give alms out of your abundance; if you have but little, do not be afraid to give alms even of that little.”

Above all else, giving directs our heart to Christ. Matthew 6:21 tells us, “For your heart will always be where your riches are.” This is why it’s necessary to give each gift to the person of Jesus Christ: it draws our heart to him.

Read the story of the faithful steward in the parable of the talents, (Matthew 25:21). Giving is one of our responsibilities as stewards, and the more faithful we are in fulfilling our responsibilities, the more we can enter into the joy of knowing Christ more intimately. (“Well done good and faithful servant. Come share your Master’s joy.”) Nothing in life compares with that.

For most of us, becoming more generous is a journey that takes time. The more we expose ourselves to what the Bible teaches about giving, the more generous we become. And once we become generous, it’s easy to teach our children to be generous.

There are lots of things parents need to teach their children . . . to look both ways before crossing the street, how to speak properly; how to make their bed; how to dress and even how to manage their money and how to be generous.