Financial Clutter

Recently, we met with the staff of a Catholic Credit Union. We talked about ways Compass Catholic can help their members be wise financial managers and how they can honor God with the way they spend, save and give money.

The president referred to something he called “Financial Clutter” as those things that get people into trouble financially and sidetrack them from their most important financial goals.

Making good financial decisions isn’t just about providing for the distant future; it’s about cutting down on the very real worries you feel each day, whether that means saving more or spending less, paying off credit cards and the student loans or getting rid of the mortgage.

Here are some ideas to consider to help you reduce the amount of financial clutter in your life…

Giving is a way to honor God and thank him for everything he has given to us. It’s easy to justify why we can’t be generous, and most people think once they get their finances in order, then they’ll be able to give. Our experience is that giving is the first priority. Once you start giving back to God some of what he’s given to you, everything else falls into place in your financial life. Acts 20:35 “Keep in mind the words of the Lord Jesus, who himself said ‘It is more blessed to give then to receive.'”

If you spend more than you earn, it always causes worry, stress and mental clutter. This is not to say you have to pay for everything with cash; mortgages and student loans are a practical reality for the vast majority of Americans and it’s almost impossible to rent a car or a hotel room without a credit card. Still, it’s crucial to make a realistic budget and stick to it, so you live within your means. Proverbs 21:20 “Precious treasure remains in the house of the wise but the fool consumes it.”

Most financial experts say you shouldn’t spend more than one-third of your take-home pay on housing and related expenses. This is especially true if you don’t make much money, because other bills will quickly gobble up the rest of your budget. Think of it this way: If you take home $2,000 a month but spend half that on housing, you have $1,000 left to survive. That works out to $33 a day for food, gas, clothing, insurance and everything in between for the whole family. If you stretch yourself too thin on your housing expenses, you’ll struggle to pay for everything else.

Intelligent people can disagree over precisely how much you need in a rainy day fund. But not saving anything for unexpected events, and living paycheck to paycheck is irresponsible. It naively assumes you won’t ever need the money for an emergency should something unfortunate happen.

You know that you, along with every American, should be saving for retirement in some way. If your employer offers a 401k match, it’s free money from your employer as a reward for something you should be doing anyway, so take advantage of it. Not contributing to a retirement plan with an employer match is like throwing away a gift of cash. It stays in the back of your mind and causes clutter!

There are risks with any investments–particularly if you chase aggressive, short-term gains. Higher rates of return come with higher risk, and promises of instant profits through day-trading or house-flipping often prove themselves too good to be true. Keeping greed in check is crucial–but so is planning properly to prevent falling behind. If you build up a good emergency fund and start planning for retirement early, you won’t have to take big risks out of desperation as you get closer to retirement age.

The other side of saving for retirement is being tempted to think the money in your 401k or IRA can be used early (before age 59½). Cashing out one of these retirement funds early comes with steep penalties: Federal taxes, State taxes, and early withdrawal penalties. In addition to the tangible loss of that money, there’s the fact that you still need to save for retirement.

Shifting the shortfall from one part of your budget to another is not a viable long-term solution. Worse, any money taken out of your 401k or IRA could have been growing over time–so you don’t just lose the money that’s withdrawn, you lose the lost investment returns on that money as well as wasting money by having to pay the penalty and taxes for early withdrawal.

Life insurance companies aren’t run like charities, and they set premiums based on the risk of payouts. It’s only natural, then, that an older American has to pay a higher premium for life insurance. The vast majority of folks can take out a substantial and very affordable life insurance policy in their 30s and cover their spouse and family into their 50s or 60s. The same holds true for disability insurance to protect your earnings on the job.

Along the same lines, a good will is a crucial part of providing for your family should tragedy strike. In most cases, a visit with a qualified professional for a few hours will ensure your family stays in control of any assets and avoids estate taxes–not to mention preventing any squabbling among survivors. Our Bible study Set Your House In Order, will help prepare you for the discussion with a qualified legal professional.

The bottom line is getting distracted by financial clutter can cause all sorts of problems.

Just like cleaning out the clutter in your garage, cleaning up the financial clutter needs to be done one step at a time. Goes back to old saying – If you continue doing what you have been doing, you’ll continue to get the same results you’ve been getting.

If you aren’t sure what to do to get control of your financial clutter, go to and under the resources tab, download a copy of the Compass Money Map. It will help you set priorities and meet goals to get rid of the financial clutter, and make sure it does not come back.

Tune into our podcast for more on getting rid of financial clutter.

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