Use a Sinking Fund to Stay Afloat

Being proactive is a quality of the most highly successful people, especially when it comes to handling money. 

One of the ways to get ahead of the financial curve is to use sinking funds. A sinking fund is money that you choose to collect with a specific purpose in mind. Sinking funds are the best way to save money for a specific item that you know is going to happen quarterly, bi-annually, yearly or even a few years down the road.

Sinking funds are similar to the escrow account that is part of your mortgage. Each of your mortgage payments goes in 3 directions. One third pays down the principle amount of your loan. One third pays the interest on your loan. And the third part goes to escrow, which is money set aside to pay for your property taxes and insurance, which are usually due once a year.

The term “sinking funds” is a misnomer. They should be called “floating funds” as they keep you from sinking into debt. When it comes to personal finances, sinking funds offer a great way to plan for your future and make sure you reach the goals you’ve set. By setting the money aside before you need it, you will avoid using your emergency fund or running up credit card debt.

The sinking funds should be in liquid accounts; a high-interest money market account would be ideal. The type of account you use also depends on how far into the future you will be using it. If you are saving to buy a house in 5 years, you may want to use longer-term CD’s or an online savings account that offer a higher interest rate than your local bank does.

Sinking funds are different from your saving and investment accounts. Those are working to build wealth, and as your savings grow, it will eventually begin to work for you. This is not money that you want to dip into for short term spending.

A sinking fund is money you plan to spend with a specific goal in mind. For example, if you know you are going to have to replace your roof in 4 years, you can start saving now so you have the money saved when you need it in 4 years.

As you get better at budgeting and are more aware of where every penny is going, you can recognize areas where a sinking fund would be appropriate. Without a budget (or spending plan) it’s very hard to figure out where to use a sinking fund or how to get the money to set aside.

When you set up your sinking funds,  decide on how much you need in each category, then divide that amount by the number of months you have until you make the purchase. Save the money until you reach your goal.

Christmas always seems to be really far away, until it isn’t. January and February when all the Christmas bills start rolling in can be one of the most stressful times of the year financially for many people. Starting a sinking fund for Christmas presents is a great way to avoid the post-holiday credit card blues, and save yourself a ton of money in interest. Using cash for Christmas also helps you control spending.

Let’s say the average amount you spend for Christmas is $500. In January, create a sinking fund for Christmas and save @ $42/month. In December, you’ll have $500 to pay for Christmas expenses without going into credit card debt.  As a bonus, you get to earn a bit of interest on this money as well.

The nice thing about sinking funds is once you hit your goal, you can stop saving for that particular item. For example, if you need $1,000 in your technology fund to replace your laptop and you hit that $1,000 mark, you can stop saving for the laptop.

If you own a home, there’s always something that needs to be done. You may want to add more insulation, paint the inside or outside, add a deck, or remodel a bathroom. If you are like us, there’s always a wish list of things we want to do to the house. A sinking fund helps us get ready to do those things with no negative impact to our budget.

We highly recommend setting up a sinking fund for a yearly family vacation, including travel, meals, and attractions.

Another great example of a sinking fund is back to school shopping. The kids need new pants, shirts, socks underwear and shoes. If you live up North they may also need coats, hats, boots, and gloves. Then there are all the “must buy” lists that the teachers send home. Most of those lists have a long inventory of things for each child to bring to school

And there are additional school-related expenses for extra-curricular activities like band or field trips. A back to school sinking fund is a great way to keep all that school spending from breaking the bank.

The comprehensive list of every sinking fund you’ll ever need depends on your personal circumstances. One person may want to save for the vacation of a lifetime and someone else may just want enough cash to pay for Christmas.

If you haven’t been managing your money it will be a slow start because you can’t start putting money aside for Christmas and back to school and vacation and home renovations all at the same time. You’ll have to start slowly and build each sinking fund from the ground up.

Sinking funds are an excellent way to be a good steward of God’s money as they will move you from a reactive to a proactive position with your finances. You’ll be able to see the light at the end of the tunnel as you avoid future debt. Once you start using this method, success becomes easier and easier.

The Compass Catholic Podcast offers more on this topic.

Don’t Take Out a Loan for Vacation

If you are recovering from 3-4 long, long months of cold, snow, ice and wind you may be starting to dream about summer vacation in a nice warm climate.

Vacations are great and time away from work, but don’t get so carried away with vacation dreams that you take out a loan to pay for your vacation.

Maybe taking out a loan and paying for vacation in installments sounds like a good idea. But let’s get realistic, a loan is a loan is a loan, and loans create debt.

Some vacation loans advertise that they will not charge interest, but believe me the company making the loan is not giving you money for free and whatever fee they charge is included in the amount you are paying.

Think about this. You decide to take a great vacation in the summer of 2019 and in order to pay for it, you take out a personal loan for $5,000. Your interest rate is 10.5% APR and that means you will be paying a $160 monthly payment for three years. In 2022 do you really want to still be paying for a vacation you took in 2019?

Probably not.

Using a loan to pay for unnecessary expenses, like vacations is one step down a slippery slope of financial decisions that can have a negative impact on your financial future.

To avoid vacation debt, get the family involved in planning for a vacation that everyone will enjoy and one which is within your budget. So many people keep their kids shielded from financial realities which does not teach them anything about wise money management.

Vacation planning is a great way to teach the kids about setting goals and working to achieve them. Even if your summer plans are a staycation, there is some level of spending involved.  Engage the kids by setting up a chart on the fridge showing how much the family needs to save in order to reach your vacation goal. Create one of those thermometers that non-profit organizations use for fundraising goals. This teaches the kids a lot about delayed gratification, making and reaching goals and financial stewardship, which are all good things for them to learn—the earlier the better.

Along with getting the family involved, take a hard look at the family spending. As you dig deeply into spending, you may discover unnecessary purchases of as much as $100 – $200 a month that could be easily saved for a vacation.

A restaurant meal at lunch every day is about $10 a day; $50/week; $200/month and $1,200 over a year’s time. By analyzing the money you are spending on lunch, you may be able to redirect money to areas that are more important to you, such as vacation.

In addition to saving in advance for the vacation, make a budget for the spending you’ll do on vacation. This will help maximize your money.

Be flexible with your vacation destination. Websites like The Flight Deal and Air Fare Watchdog post daily flight deals from major U.S. cities to both domestic and international locations. Many of the airlines will also post flight sales and deals on their own websites.  If you’re not tied to visiting a particular place, you can score a great deal on a flight. Many of these deals will come with restrictions—you may only be able to fly on certain days of the week or between certain dates. However, for flexible vacationers, this can be a great way to save a ton of money on airfare.

It also helps to explore options for accommodations. Staying in one place may be convenient, but changing the place you stay may result in big savings. Hotels in some big cities, such as Washington DC revolve around business trips on weekdays, leaving weekends open for tourists. At the same time, the weekends are more expensive in tourist-heavy destinations; so hotels may give you a better rate if you check in on a weekday rather than a weekend.

You’ll also need to budget for any tours, entrance fees or other money spent on visiting sights, museums and landmarks. Consider stuffing your itinerary with famous and free attractions. Many museums, like New York’s Guggenheim and American Museum of Natural History, offer free hours every week or are donation-based. Skip paying for a guided tour by downloading maps to your phone and researching attractions as you plan.

Souvenirs are an extra line item in your budget. We highly encourage you to help the kids save an amount they can spend on souvenirs. This is teaching them how to manage money and eliminates the whining that comes when they want you to but every trinket they see in every location you visit.

Restaurant meals suck in vast amounts of your time and money. For road trips, prepare coolers full of food and drinks to avoid fast food on the road. Food from home comes in handy at theme parks, where a small bite can cost as much as a full meal—be sure to check if the park allows you to bring a picnic.

For bigger trips, visit local markets for snacks instead of eating out every time you get a little hungry. Eat cheaply most of the time so you can splurge where it’s really important.

Get around like a local by using public transportation if you can, especially in big cities. Research your options to see if there’s a transit stop between where you are staying and where you are going. And while you’re at it, figure out the transit system’s peak times so you can avoid the stress of rush hour.

Keep the whole family involved in the planning so they will be much less likely to complain about cutting back. If they are involved and if they see a visual reminder of saving for vacation it will bring the family together in unity.

We all need time away from our day to day work. Even God rested on the 7th day when he completed the work of creating the world.

Saving up for a big trip isn’t easy, but these strategies should help you save a little bit faster and have your trip already paid for before you leave home. 

Planning ahead will help you have a debt-free vacation and return home debt free so you can keep that vacation feeling alive!

The Compass Catholic Podcast offers more on this topic.

Five Ways to Give Yourself a Raise

If you are like most people, it often seems that the money going out each month exceeds the amount of money coming in. Sometimes even the basic necessities appear to be out of reach. Saving for an emergency fund is impossible. And heaven forbid that someone gets sick or hurt and needs medical care.

Today we want to look at several ideas to increase the amount of money available to you.

The starting point is the taxes on your income. Examine your tax return. How much money are you going to get back from the IRS? If you are getting more than a few hundred dollars back, review your W-4 worksheet. You can get one from your HR department or google W4 Worksheet and download a copy. You may be able to claim a few more exemptions to maximize the amount of money in your take home pay with every pay check.

Focus on getting your tax refund or tax due to be as close to $0.00 as possible. Use the examples on the W-4 worksheet and compare them to the exemptions you claimed last year, then modify this year’s exemptions based on what happened last year.

The ultimate goal is to get as much as possible in your pay check without having to pay taxes at tax time next year. Under no circumstances should you be getting $1200 or $2400 or more back. If you are getting $2400 back this year, that means you could have received $200 more each month in your pay check. There is no sense in giving the government a loan and running up credit card debt because you are paying too much in taxes each month.

After examining your income, take a look at your car insurance. For many people, car insurance is a one and done. Once they obtain car insurance they tend to stick with the company, mostly because it’s easy. Let’s face it, shopping for car insurance is a pain, so once you have it you don’t want to go through that process again.

We recently read an article on the Penny Hoarder and they were talking about a service called Gabi, which will do the car insurance shopping for you. All you have to do is link your insurance account and provide your driver’s license number, and Gabi will scan your existing insurance plan, analyze your coverage, compare the major insurer’s rate for the same coverage and help you switch on the spot if you find a better rate.

They are making an apples-to-apples comparison so your coverage won’t decrease with a cheaper rate. They keep your information on file and continue to monitor costs and coverage to save you money in the future. The company claims that they find an average savings of $720 per year, which is about $60 per month savings!

We do not have any personal experience with this company, as we did our comparison shopping prior to finding it, but it sounds like a good idea to investigate further.

Another way to save money is to stay up to date with your Credit Score and Credit Report.

Is the information on your credit report accurate? An estimated 20-40% of credit reports have inaccurate information and if that inaccurate information is bad, your credit score could possibly be lower than it should be. The lower your credit score, the higher interest rates you will receive when you try to purchase anything by getting a loan. Cars, houses, renting an apartment, even your ability to get a new job can be impacted by a bad credit report and a low credit score.

Go to AnnualCreditReport.com to get a free copy of your credit report. If you find inaccurate information, follow the instructions to dispute it and get your information corrected.

Each of the three major nationwide consumer credit reporting companies— Equifax, Experian and TransUnion—are required by Federal law to give you a free credit report every 12 months if you ask for it. We recommend getting a report from one reporting company every four months so you can stay on top of your credit report information.

If you want more information on credit reports and credit scores check out our blog: Credit Scores & Real Life

Life Insurance is another potential place to cut spending. Suggested coverage is 10x your annual salary. The purpose for life insurance is to pay-off your outstanding debt and provide your loved ones with a source of income in the event of your death. Life insurance should not be used as an investment. There is a sound strategy in buying term insurance and creating a savings plan outside of the insurance through a program of mutual funds or other investment vehicles. The primary benefit to term insurance is that you can purchase much more coverage (sometimes as much as ten times more) than insurance with an investment opportunity attached. This is very important for families with children.

Term insurance typically comes in two forms and is the least expensive form of life insurance. In one form of Term insurance the premium increases each year while the benefit amount remains the same. This form normally has the lowest initial cost. The Second form of Term insurance is sometimes called Level Term and is probably the most common form being offered.  In this form, the premium and benefit remain the same for a specific number of years—10 years, 20 years, 30 years—and then the price will increase or the policy will lapse. If at a later date you decide that you need insurance again, you will have to qualify based on your health and your then current age.

Operating everything out of one bank account can make your finances muddy and contribute undue stress to your money management. To simplify, open a second account for a dedicated purpose.  Use an online account where there are no fees and the interest that the bank will pay you is usually much greater than your “brick and mortar“ bank. This is a way to ensure money is set aside for those items which only come up once a year (like Christmas or summer vacation) or each quarter (like car insurance or home owner association dues.)

The Compass Catholic Podcast offers more on this topic.

Should You Buy or Lease a Car?

When you need a vehicle, your two major choices are to buy or lease, but figuring out which is best is like trying to make your way through a thick forest in the dark of night. So, let’s dig into the good, the bad and the ugly for both leasing and buying.

When you lease an automobile, you do so for a specific period of time. Because leasing allows you to pay based on the vehicle’s depreciation for the time period you have it, you can generally expect to pay 60% of the vehicle’s purchase price within the time frame of your lease. This means your monthly lease payments are considerably less than if you decide to buy the same car new and get a three-year loan.

Since the typical lease is for 3 years, you are driving the car during its most trouble-free years. Many leased cars have warranties that make paying for maintenance zero-dollar or very low cost, which makes any problems easy to fix.

Leasing means you’ll get to experience the excitement that comes with driving a new car every two or three years so you are always driving the latest technology.

Cars are not an appreciating investment. By leasing, you don’t have to worry about fluctuations in the car’s trade-in value. At the end of the lease, just drop off the car at the dealer with no worry about trade in value or trying to sell the car yourself.

However, there are fees related to leasing in addition to the monthly lease cost, such as a down payment, lease initiation fee, security deposit, disposition fee, and documentation fees such as tax, tag, title registration and license. In most cases, you must purchase gap insurance to cover the total loss of the car through accident or theft. Gap insurance pays for the difference between the value of a car at the time it’s totaled or stolen and the balance of its lease. Standard auto insurance pays only what a car is worth at the time of a theft or accident.

If your lifestyle situation changes, it is harder to get out of a lease contract than it might be to sell a used vehicle. If you need to get out of a lease before it expires, you may be stuck with thousands of dollars in early termination fees and penalties—all due at once. Those charges could equal the amount of the lease for its entire term.

One of the biggest fees that leasers get hit with is going over their allotted mileage. You can only drive a set number of miles throughout your lease term. If you go over that limit, you’ll have to pay an excess mileage penalty, which can range from 10 cents to as much as 50 cents for every additional mile. If you are over the mileage limit by 10,000 miles, at $0.50/mile, you may have to pay as much as $5,000! There is no upside for driving fewer miles—you don’t get a credit for unused miles.

When leasing you need to return the car in showroom condition, minus usual wear and tear. If your car is a cafeteria on wheels with all the spills that entails, be prepared to pay extra at the end of the lease.

At the end of your lease, you have nothing—no transportation, no trade-in, nothing to sell. If you do decide to take on the responsibility of a lease, make sure you read ALL the fine print!

Buying a vehicle with a conventional car loan is pretty straightforward. You borrow money from a lending institution and make monthly payments for some number of years.  A chunk of each payment is interest, and the rest is principal. As you repay the principal, you build equity until—by the end of the loan—the car is all yours.

When you buy a car and finance it, your monthly payments go towards owning an asset. Once you have completed the terms of your financing agreement, the car or truck is yours to keep as long as you like.

If you are committed to driving your vehicle for an extended amount of time and have adequate car insurance coverage, you are unlikely to lose out financially, as long as you make a sufficient down-payment and perform proper maintenance.

Buying a car means you can drive as many miles as you’d like. If you buy, you can sell the vehicle and get its current value, or you can trade it in and subtract that value from the new loan amount you need to borrow. The longer you keep a vehicle after a loan is paid off, the more value you get out of it. Over the long term, the cheapest way to drive is to buy a car and drive it until the wheels fall off.

Buying means you’ll have higher monthly payments than leasing. If you don’t have a lot of cash on hand or if your credit is bad, buying a new vehicle can be quite a challenge. Lenders generally require a sizable down payment, and there are additional costs such as tax, tag and title, which adds even more to the bill.

If you choose to buy, we recommend a certified used car so you will have some warranty on the vehicle. But that warranty won’t last forever and finding a trustworthy mechanic can be challenging, and future car repairs could cost thousands. You’ll be responsible for trading or selling your used car if you want a different one.

It’s very difficult to make a fair head-to-head comparison between a six-year loan and the standard three-year lease. While lease payments are typically cheaper than loan payments per month, they still add up over time. If you lease one car after another, your payments are never ending. When you buy and pay off your auto loan, you eliminate a fixed monthly cost and won’t have to worry about a car payment, especially if you keep the car for a long time and save the amount of your car payment to fund the purchase of a replacement vehicle.

The price of a car is accepted as a typical cost of American life by most people. Paying for a new or used vehicle is one of the most significant expenses individuals and families incur, other than housing costs.

Weighing the pros and cons will help you come to the decision that is right for you and your family. Use calculators to crunch the numbers, talk to qualified vehicle and financial pros, neighbors, friends and family members. Check out sites like https://www.kbb.com/ or https://www.autotrader.com/car-values/ and be sure to shop around so you choose a reliable car that holds its value and gets good fuel economy.

Remember, a car is simply transportation, not a personal statement about you. It is simply a way to get from Point A to Point B. Be sure the financial obligation of leasing or buying fits into your monthly budget so you are being a good steward of God’s blessings.

It all comes down to needs vs wants. Are you buying reliable transportation or trying to impress people with the kind of car your drive?  Which of those options makes you a better steward of God’s blessings?

I’m Dead – Now What?

There is a book titled I’m Dead Now What and I just love the title because it’s an attention grabber and addresses the need for everyone to be prepared for the end of life. There was also a recent article in The Washington Post titled “Everything Your Family Needs to Know when you Die.”

The end of our life is inevitable for all of us. It can be summed up in a verse from Isaiah 38:1. “In those days, when Hezekiah was mortally ill, the prophet Isaiah, son of Amoz, came and said to him: ‘Thus says the LORD: Put your house in order, for you are about to die; you shall not recover.’”

As the saying goes, two things are certain—taxes and death. We know when taxes are due, but we never know when death will occur. And it’s not even about death. What if someone becomes disabled, seriously ill, or comatose? How do the family members know where important information is located and how to use it?

We have a notebook we call The Bean Book. It’s one-stop shopping for all the important information either of us or our son would need. The documents in this book are things like: Birth Certificates, Sacramental Records (including our marriage license), Military Discharge, Trust, Will, Power of Attorney, Deeds, Vehicle Titles and copies of our Passports and Driver Licenses.

In addition to all the documents, your family needs a complete list of the professionals who are handling different concerns. The list includes Attorney, Accountant, Insurance Agent, Financial Advisor, Real Estate Advisor, Banker, Stock Broker, key contacts at your job and any friends you would recommend to your family as a wise source of godly counsel.

If you are like most people, this information is scattered about. Maybe some of it is on statements from these businesses. Part of it is probably in your contact list on your phone. And other pieces are on papers in files in your desk.  But what a blessing for your family to have all the information listed in one easy to find location.

The family or your caretakers also need to have a complete picture of your financial situation. A big part of that is a list of all the bills and how they get paid. There are so many online transactions these days and if someone is not familiar with how the bills are received and paid, they may get into financial trouble out of ignorance. We have a spreadsheet listing: the company issuing the bill, the account number, how the bill is received, the email address to which it is sent, when it comes (monthly, quarterly or yearly) how it gets paid (auto draft, credit card, the bill payer function on the bank’s website or payment that’s generated from the billing company website.)

The number of online transactions we each have means the family needs to know about online accounts, and all the URLs, security questions and passwords needed to access them. Developing a secure password is important but even more important is having your spouse or caretaker know what the password is if they need it in an emergency and where to find it. We use an app for our passwords, so investigate and find one that’s right for you.

A Financial Statement is another tool to give your family peace of mind. List your debts then list your assets and subtract debts from assets to determine if you have a positive or negative net worth. This gives your family a snapshot of their financial health.

The financial picture is made real by having a spending plan the family can access and use. They have to know how much is spent on a monthly basis NOW in order to anticipate any adjustments that will be made after someone dies.

And knowing your net worth and budget helps you calculate how much insurance you need. If the income is no longer available where do the survivors get their income?  What is available from insurance, social security, company benefits, etc. The amount will change as you move through different stages of life so it is important to visit insurance needs each year.

We may hate to think about someone else making health care decisions for us, but it’s important for you to have a Catholic Living Will, HIPPA waiver, Health Care Power of Attorney and Organ Donation card.

Much of what our secular materialistic society promotes strays from God’s teachings on how we should handle our finances and possessions. We should be equally vigilant in making sure that our health care and end-of-life directives follow Catholic teaching, and not those of a society that is looking for easy and quick fix solutions, i.e., euthanasia.

Agreeing to a euthanasia clause as part of your medical directives is contrary to our faith. Everyone who is alive has inherent dignity, deserving basic care, even if there is no hope of recovery. Nutrition and hydration must be provided, even via artificial assistance, along with other basic necessities such as the provision of warmth, cleanliness and pain management.

To apply this reasoning correctly we must recognize that all human life, not only a particular kind of life we might consider “normal” or “productive,” is precious and should be preserved. People suffering from a very severe disability, do not lose their human dignity. 

Planning your funeral may be a morbid thought, but if there are favorite readings or songs you want at your funeral or if you want someone who is very special to you to sing at your funeral Mass, then it’s a good idea to write down what you want so those left behind can fulfill your last wishes. It is a blessing for your family to have these decisions made.

Let’s remind ourselves of this reality. We will take nothing with us. “And [Job] said: “Naked I came forth from my mother’s womb, and naked shall I go back there” (Job 1:21).

One of the best ways to demonstrate your love for your family and friends is to set your house in order and encourage others to do the same.

Check out the Compass Catholic Bible study, Set Your House in Order. It’s a 5-week small group study which walks you through the process of getting all your important information created, updated and organized.

Don’t Retire – Rewire

The title of today’s blog is borrowed from a book of the same title written by Jeri Sedlar of the Conference Board.

When most people think about retirement, they only think about not working, they don’t really think about what they will do or how they will keep themselves busy.

Maybe you want to play golf, go fishing, cruise around the local lakes in your boat, or travel to some beautiful and exotic places in the world. But sooner or later, you will return home, then what are you going to do all day every day?

Talk with family and friends who have retired to hear what they did to prepare and what they struggled with the most after retiring. We always encourage people to seek godly counsel and this is one life event where you want to take time to seek advice from people who have been there.

One of the biggest impacts on your retirement plans is your budget because your financial situation may limit your ability to fulfill your retirement dreams. Some people may have enough money to do what they’d like, while many others are going to struggle to maintain their quality of life.

The challenge is that if you are not using a budget prior to retirement, you have no idea of how much you’ll spend during retirement. If you don’t have a budget and know exactly what you are spending now, you are only guessing at the amount of money you’ll need to live on in retirement.

Once you have a retirement budget, match your spending against the income stream available to you in retirement. When will you be eligible to take Social Security? Do you have a 401K or 403B and how much income will it provide? What about a pension plan or an IRA or other long term savings available to you?

Everyone understands the stock market rises and falls in cycles over the years. Yet when it comes time to plan for retirement, this basic fact can be very hard to deal with. If the market drops right after you retire, you could find yourself with a far smaller retirement nest egg than you anticipated. To mitigate the impact of a down market, it is important to reallocate your retirement savings and move to more conservative investments as you get closer and closer to retirement.

Ditch the debt to put yourself in the best possible position for retirement. Concentrate on paying off all credit card and consumer debt as quickly as possible so that you are not dragging your debt into retirement. In addition to consumer debt, work hard to get your home paid off before you retire.

When you are thinking about retirement, how do your plans tie into the plans your spouse has? Couples don’t always have the same ideas about anything, let alone retirement so it’s important to have open-ended discussions about what each of you expects in retirement. You need to take time to discuss and develop a plan that works for both of you.

Talk about everything, including your expectations for retirement, what your new schedule will look like, how you’re going to divvy up household tasks and how your identity is going to change. Compromise is created when each of you makes a list of expectations such as:

  • Downsizing, or moving to a new location to be near family
  • Places you would like to travel
  • Cultural or sporting events you want to attend
  • Exercise or sports activities you’d like to share
  • Volunteer work you will enjoy

Once you each develop this long list of possibilities for retirement go through it together noting what is the same on both lists and where the differences are. Have a give-and-take discussion where each of you compromises to some extent. You both need to have your own activities and you also need to spend time doing things together.

Leaving a job often leaves a void in a person’s life. If you’re like many would-be retirees, you’ll likely be retiring from something such as job or boss you hate, and not to something better.

Even if you are in a job you’ve come to dislike, work is a reason to get out of bed every day to feel useful and productive. Most people feel needed at work as they contribute to the purpose of the business where they work. So, when you stop working, what will compel you to get out of bed each morning?

Using your time in retirement wisely means figuring out your purpose during this season of life. Humans continue to thrive when they have a purpose and are contributing to something.

Retirement is a time when you can serve other people by making a worthwhile contribution to a greater good. Giving your time and talents to a worthy cause is one of the most fulfilling things you can do in life. There are an unlimited number of worthy causes that need volunteers to help achieve their mission. Explore something that you never had time to get involved in when you were working.

Retirement can be one-third of your adult life.  Having a purpose and being engaged is a sign of wellbeing. As you wind down your work, begin thinking about a cause that can become a passion. What talents and strengths do you have that will enable you to contribute in a meaningful way to a purpose that is close to your heart?

Retirement offers you the chance to do what you always wanted to do, and no longer focus on simply earning a living. Plan your retirement so you have a purpose for each and every day.

“Do nothing without deliberation; then once you have acted, have no regrets.” Sirach 32:19

What’s Your Definition of Financial Success?

Too many times we define financial success according to an outside standard instead of defining it for ourselves. We look at the person with the six-figure income as financially successful. Or we think the person with the biggest, fanciest car is financially successful. Or we think the people who live in the high-class area of town with the big houses are financially successful.

We fail to take into account our own lifestyle, the goals specific to our own life, our own starting point and our own resources as a way to define financial success.

It’s like looking at someone who is a physical fitness trainer as a benchmark for defining our own physical fitness. We will never go from being a couch potato to being a long distance runner in a short period of time. If we are trying to improve our health we need to take it one step at a time. We have to acknowledge the weight we lost over the last year. The amount of daily exercise we are doing now. And the way we have changed our eating habits to be healthier.

So, when we define financial success, we need to start with where we are, define where we are going, evaluate how we have used the resources available to us and measure how much progress we are making to get to our own definition of financial success. Your definition of financial success is not the same as how the couple next door, or your brother or your friend define it.

To some, financial success might mean a certain income. To others it might mean all their debt is paid off. To others, it might mean total financial freedom. Some people may define financial success as simply being able to pay the monthly bills with a little bit left over.

The best way to define financial success is very simple. How much progress have you made on your financial goals? If you are making progress according to your plan, then you’re financially successful.

It takes hard work and paying attention to what you are earning and spending. But almost everyone can make some progress in being financially successful. We frustrate ourselves when we define financial success by looking outward at other people instead of looking inward at our own progress.

If you define financial success as having a million dollars in the bank and you are hardly making ends meet, then you’ll never feel financially successful, even in you manage to dig totally out of debt and your retirement is fully funded.

No matter what anyone else is doing, if you are putting yourself in a better position, little by little then you are making progress and being financially successful.

If you think that financial success is impossible, look for a realistic definition that relates to your own life. If you have $25,000 in credit card debt and you reduce it to $20,000 by the end of the year, you are being financially successful. If you have not saved anything for retirement and you can save $1,000 this year, you are being financially successful. Figure out what financial success means in your own life and aim for that. 

You can’t compare yourself to someone who was given a huge inheritance or someone who made a killing in the stock market when a company they founded went public, or someone whose salary is 10 times what you make.

Are you doing better today than you did yesterday? That simple question eliminates all the excuses you may conjure up for yourself. You can’t excuse your own failure based on the success of those around you.

Measuring financial success is no different than measuring your progress in getting healthy. You may weigh 300 lbs., but if you weighed 350 lbs. last year you’re making progress.

All we can really do is evaluate the progress we are making on our own journey. Financial success isn’t hitting some arbitrary net worth number or buying a certain item.

It’s about a long term journey one step at a time to be in better financial shape each week, each month and each year. It’s hard work. But it is well worth the effort.

Start your journey to financial success by being intentionally grateful for what you have. Instead of wanting more and more, appreciate all those things that you already have. 

Once you begin to appreciate what you do have, the constant quest for more goes away. You’ll see that a bigger house doesn’t really matter.  A bigger TV screen doesn’t really matter. A newer car doesn’t really matter.

Look at what you DO have, not what you are lacking. Philippians 4:11-13 tells us “Not that I say this because of need, for I have learned, in whatever situation I find myself, to be self-sufficient.I know indeed how to live in humble circumstances; I know also how to live with abundance. In every circumstance and in all things, I have learned the secret of being well fed and of going hungry, of living in abundance and of being in need. I have the strength for everything through him who empowers me.”

What actually matters in terms of success and failure is how well you’re managing what God has given to you. If you work hard, spend carefully and give cheerfully, no matter what happens, you’ll be better off than if you had done nothing at all. You’ll be able to weather both the good and bad that comes your way. Nothing else matters, because there’s nothing else you can really control.

Judging your circumstances against other people makes you frustrated, complacent or arrogant.  God is calling you to be a faithful steward of all the blessings he has given to you. He is not calling you to compare yourself against anyone else or to define your success based on anyone else’s journey through life.

Health Care Sharing Plans – Part 2

To help you decide if a health care sharing plan is right for you and your family, we are going to look at things to think about and questions to ask.

Several plans have restrictions on the doctors available to you. If you live in a large metropolitan area, this may not be a problem, but if you are in a small town or rural area, you may not have much choice in doctors. Be sure you understand which doctors are included or excluded from any plan you consider buying.

Some of the sharing plans will negotiate lower costs with the doctors and other plans require you to do the negotiating. Are you comfortable negotiating lower costs with your doctor? Most medical providers are so happy to not deal with insurance companies and their claims process that large discounts are often available for cash-pay customers who are willing to ask.

There are several health care sharing plans which include a savings card for dental, vision, and prescriptions. And others don’t have that option. If those services are important to you, ask before buying.

One of the plans requires you to send your monthly payment directly to another member instead of to a clearing house. This may appeal to you as it gives you the chance to tell someone you are praying for them or maybe you like connecting with people in different areas. Other people prefer to send payments to a clearing house to avoid the personal connection. Which is right for you?

The terms around pre-existing conditions and how pre-existing conditions are defined vary with each program. In general, there is some time limit applied, and sharing around subsequent events related to a pre-existing condition are either not shared, or shared at a lower level. If you have any pre-existing conditions, be sure to understand exactly what is and is not covered. None of the programs we investigated decline membership due to pre-existing conditions. 

Even though some of the programs will actually help pay for adoption costs, the adopted children are subject to the same eligibility requirements as other new members, which means adopted children who have pre-existing conditions will be subject to the pre-existing conditions clause. This limitation on adopted children seems to be in conflict with the family friendly mindset of these plans.

People who use tobacco, drugs, or alcohol may be excluded. Any medical expenses related to these can result in otherwise eligible expenses being rejected for sharing. Tobacco use is prohibited across the board in all health care sharing programs. In addition, recreational marijuana use (even in legalized states) would not be consistent with program guidelines. 

People who participate in hazardous activities need to be cautious. Each program is different about what exactly constitutes “hazardous.” It might be riding motorcycles or hobbies that require you to wear a helmet such as three-wheel ATVs, off-road vehicles, rock/cliff climbing, spelunking, skydiving, deep sea diving or bungee jumping. 

Each health care sharing program has at least some caveats with respect to being a secondary payment source for those also eligible for federal or state assistance. If you receive federal or state assistance be sure to understand the limits of the sharing plan. 

The sharing programs have their own prescription drug policies, but generally prescriptions are only shared related to a specific medical need, and only for a short duration.  Such prescriptions would generally fall under the same per-incident limits or personal responsibility. 

There are some restrictions as to how long medication is covered. This means that someone who developed a condition like Type I Diabetes after becoming a Member would only have insulin considered a shareable expense for a very short duration. Maintenance prescriptions are not eligible for sharing at all.  Members are encouraged to participate in prescription discount programs such as NeedyMeds, GoodRx, OneRX, and LowestMed.

While all of the health care sharing programs have strong histories of success, there is no guarantee of payment because these are voluntary programs and not an actual contract for health insurance benefits. 

In fact, each group makes it abundantly clear they are not insurance and membership is not a contract. 

Typical disclaimers read …

  • Whether anyone chooses to assist you with your medical bills will be completely voluntary because participants are not compelled by law to contribute toward your medical bills. 
  • Therefore, participation in the ministry or a subscription to any of its documents should not be considered to be insurance. 
  • Regardless of whether you receive any payment for medical expenses or whether this ministry continues to operate, you are always personally responsible for the payment of your own medical bills.

Ultimately, members are placing a great amount of faith in these programs, which do not receive the state regulatory oversight and protection afforded to traditional insurance. 

With that being said, they have shared billions of dollars of eligible medical expenses over their history. 

The success of health care sharing depends on upholding and dutifully administering the member guidelines – on the whole, they seem to have done this so far.

There are plenty of positives about health care sharing and at the same time, there are lots of things to be cautious about to avoid surprises if you don’t have a complete understanding of the program guidelines. 

Health Care Sharing Plans – Part 1

Health care costs seem to be rising every year, which has increased the popularity of some alternatives to traditional health insurance. These are called health care sharing plans. They operate at a cost that is well below traditional health insurance but they may be restrictive with their benefits.

To help you decide if one of these plans is right for you and your family, you need to know that a health care sharing plan is typically a faith-based organization, which facilitates voluntary sharing among members for eligible medical expenses. 

Members send in monthly “shares” (which is similar to a premium) and that share covers the medical expenses of other members. In other words, I make a payment and that payment is distributed to you for health care costs you incurred, according to the program guidelines.

The premise is that people with similar beliefs and values are coming together to share each other’s burdens, which is similar to the risk-pooling nature of regular health insurance. It is the same message we find in Galatians 6:2, “Bear one another’s burdens, and so you will fulfill the law of Christ.”

A major appeal of health care sharing plans is that they are much less expensive than regular health insurance.  Families can become members in health care sharing plans for $300 to $500 per month, compared to about $1,500 per month, which is the average unsubsidized cost of traditional health insurance coverage for a family. 

The cost is usually calculated on one or two adults, and the plans we looked at have an additional cost for children. However, it is the same cost whether you have one child or ten. In addition, health care sharing plans usually have lower out-of-pocket expense limits than typical high-deductible health insurance. 

It’s easy to see the savings appeal for people who do not have job related health care or those who do not qualify for government assistance. 

One caveat to keep in mind is that healthcare sharing plans are not actually health insurance. One of the reasons they’re less expensive is that their coverage may be more limited. Their limitations of coverage are based not only on managing potential costs and claims, but also the faith-based nature of the programs in the first place.

While health care sharing plans do cover many ordinary medical expenses that health insurance covers, they typically do not cover many health-related costs deemed to be unbiblical. They may exclude payments for birth control, injuries related to alcohol or drugs, and injuries from certain hazardous activities (or even failure to wear helmets or seat belts in some situations.)

To become a member, health care sharing plans may require you to sign a statement of faith, and in some cases, they may verify regular church attendance and have your church membership validated by a church leader. The requirements vary by program, but are very similar.

Even though it may seem like a group of people pooling risk and sharing expenses is the definition of insurance, it isn’t. There are some key features of health insurance which health care sharing plans lack. Insurance is a legally binding contract between an insurer and the insured. But everything in the health care sharing plans is voluntary and not binding. Health care sharing plans do not guarantee compensation for specified loss, damage, illness, or death in return for payment of a premium.

Even though they are not health insurance they rely on a similar framework, but use different terminology. 

Here are some common health insurance terms, and their health sharing program equivalents:

  • Deductible = Personal Responsibility, Annual Household Portion (AHP), or Annual Unshared Amount (AUA)
  • Premium = monthly share
  • Claim = eligible event, incident, or illness
  • Explanation of Benefits (EoB) = Explanation of Sharing (EoS)

Health care sharing plans are designed to mimic insurance, and have successfully done so for decades to the tune of billions of dollars of facilitated sharing payments. 

In a time of rapidly increasing health insurance costs, people are turning to this alternative option more frequently. All of the major healthcare sharing groups have seen dramatic increases in membership over the last few years, with total membership now over one million people between the four major programs. 

You can find information on the web arguing how good or bad each of these programs are. In general, the website of each program is very clear about what is covered and is not—even if what they do and don’t cover isn’t always the same as traditional health insurance. And, of course, each program works differently from traditional insurance. 

And each of the healthcare sharing organizations has multiple options. And, to make it more complicated they all have their own unique approaches, pros, cons, and quirks. 

With an understanding of what these programs are, how they work, and some of the differences between healthcare sharing and regular health insurance, what should you do?

On one hand, there is considerable risk in joining these programs, as your health and even your life may be at stake. 

However, there are many people for whom these health care sharing options are working very well. Their needs are covered, and they are saving hundreds of dollars (or more) every month. 

But it’s a decision each individual needs to make based on their own situation, the price, moral appeal, and acceptance of the various coverage gaps and risks. And even being aware of the gaps, doesn’t mean it’s easy to know the risks. 

Being willing to accept those risks is a very personal decision that YOU have to make based on personal research. Nobody can make that decision for you.

The major health care sharing plans, are listed below. Most of them have an online calculator to determine your costs. There are “contact us” forms on their websites where you can request further information. And most of these sites have an online chat option. 

If you are considering a health care sharing program, we highly encourage you to do extensive homework. Look at the company, how long they have been in business, comments from members, all the different options and especially what they will and will not cover.

When making a decision such as this, which has such a potentially significant impact on your life and wellbeing, we also encourage you to pray for wisdom!

Join us next week for Healthcare Sharing Plans – Part 2. We will be having a discussion about things to beware of because they are not covered or coverage is limited.

Congratulations on Getting Engaged!

Christmas and Valentine’s Day are popular days for marriage proposals. If you recently got engaged, congratulations!

It’s time to start talking about a lot of things—the location of the wedding, the reception, the guests, the food, the flowers, and the all-important topic of money in your marriage.

It may not sound very romantic to talk about money when you still have stars in your eyes. But not talking about money before you get married is a sure recipe for disaster.

There are so many assumptions when couples go into marriage, and that is especially true about finances. Unless you have had significant discussions with your fiancé about your individual finances, you really don’t have any idea about how you’ll manage your joint finances.

Here are some examples of financial assumptions: He thinks $1,000 in debt is horrible. She thinks $10,000 in debt is normal. He wants to lease and get a new car every 2 years. She assumes they’ll buy a good used car and keep it forever. He thinks they will only use cash and buy what they can afford. She thinks that they can use credit cards and carry a balance from month to month. She thinks they need a formal budget. He would rather fly by the seat of his financial pants. She wants to keep their finances separate. He wants joint finances

It’s easy to understand how these things will come up sooner or later in a marriage, so it is best to have the money discussions when you are preparing for marriage.

The Compass Catholic book God Marriage & Money will help you with topics to discuss. There are 17 short chapters and each chapter contains a different topic related to money in marriage.

Sample discussion points include the following: 

  • Sharing credit reports and credit scores.
  • How much money can each of us spend without discussing it together?
  • How much debt do we have as a couple?
  • How much interest are we paying on debt each month?
  • How much do we have in savings?
  • What are our saving goals?
  • How much will we give?
  • Who will we go to when we need to seek Godly counsel? 

It is important to find ways for you both to be equally engaged in all money decisions or money can become a control mechanism and a divisive factor in your marriage. 

As a couple, define your decision making process around finances by creating “what if” scenarios. What if I lose my job? What happens when we have a baby on the way? What if we have to move to a different city?

We strongly believe that all the finances in a marriage should be joint. If you aren’t sharing your finances, what else are you holding back from your spouse? If there is a specific situation where the money cannot be co-mingled, decide together what is mine, yours and what is ours.

Most couples have their own hybrid system for what works best. Find the one that is best for both of you. Have a clearly defined money management system all the way from who handles the incoming mail to who handles the outgoing payments. Without a well thought-out operational plan, things fall through the cracks. One person “doing the accounting” is probably the best way to keep the books straight. But it is necessary for both of you to be involved and informed. 

When things get tough, address problems immediately (no secrets allowed).  Avoiding the issue only makes it more toxic and drives a wedge into your relationship. It may not sound romantic, but schedule regular money dates to make sure you are staying on track with your budget, savings, and financial goals.

Talk, talk and talk some more. The most important thing is to have open communication with no blame and shame. We all have hang-ups around money. Treat your partner with compassion. And it’s not just about communication. It’s about making a plan, and sticking to it together. 

Information gives you power over your finances. Not talking about your finances, not making a plan and not coordinating as a team makes you a victim of your finances. If you control your finances, they will never control you or your marriage. 

A lot of couples keep their parents involved in their finances, either by asking for loans or because mom and dad have been paying for some items and keep paying for them after the marriage.

Jesus said, “A man shall leave his father and mother and be joined to his wife, and the two shall become one flesh” (Matthew 19:5). When you marry, you are to leave your parents for your spouse in order to become financially and emotionally independent from your parents.

Part of the reason to leave is because it forces you to become more mature and more dependent on each other. That’s what marriage is all about – growing that bond between husband and wife

How you communicate about money and how you handle money as a couple has a huge impact on your marriage. Money can be one of the leading causes of divorce, so we encourage you to have the money talk when you are engaged and to find ways to work together on your joint finances.