Don’t Fool Yourself About Your Finances

Let’s face it, looking at your finances and being totally honest about what you are doing right, what you are doing wrong and what you are not doing at all is not on the top of the to-do list for most people.

But if you are not taking a realistic look at your finances, you’ll never understand the mistakes you may be making. If you don’t understand them you may continue to harm your long-term financial security.

To help you in this thought process, we have compiled a list of ways people fool themselves about their finances. See if any of these apply to you:

The first way people fool themselves is to consider debt to be a normal part of modern life. People use credit cards to buy the things they want and make the minimum payment on the credit cards, maintaining a balance and never paying them off in full. If you are digging yourself deeper and deeper into debt each month by using credit cards to finance a lifestyle you can’t afford, sooner or later you will find yourself in a hole so big that you can’t climb out of it.

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 using credit cards is a convenience of modern life. What we are saying is that if you spend more than you earn on a regular basis, and use credit cards to fill the gap, it always catches up with you.

If you can’t subtract your monthly expenses (including what you buy on credit) from your income and come up with a positive number, then you are fooling yourself with the numbers. In order to spend less than you make, it’s crucial to make a realistic budget and stick to it, so you can live within your means.

Using the word “need” when you really just want something is another way people fool themselves. There is a difference between needs and wants. Needs are the basics in life—food, clothing, and shelter. Wants are above and beyond needs—like buying the new cell phone when yours is perfectly usable, going out to eat at restaurants, a newer, bigger house, or more clothes when your closet is already full.

To see if you are fooling yourself, think about how honest you are in acknowledging the difference between needs and wants. Philippians 4:19 tells us that God will supply all our needs. He never promised to give us everything we want.

We can fool ourselves if we think that the next thing we buy will make us happy. Happiness is a state of mind and while you may get some temporary satisfaction out of a new possession, it will never bring happiness for long. Because if you set yourself up to be happy based on buying things you will be in a never-ending cycle of “what’s next?”

You will never be content if you are always in pursuit of the next purchase in an effort to buy happiness. In 1 Timothy 6:8 we learn that if we have food and clothing we shall be content. Yet our society always encourages us to be in pursuit of the next acquisition.

If you think you don’t make enough money to save anything, you are fooling yourself. You may not be able to save a lot of money, and financial advisors can disagree over precisely how much you need to save for an emergency fund or retirement. But if you are not saving anything, and you are living paycheck to paycheck sooner or later you will run up debt. You are ignoring the fact that sometime in the future you are going to have a financial emergency: a health issue, accident, pay cut, or layoff can put your finances into a tailspin.

Every American should be saving for retirement in some way. Don’t fool yourself by thinking there is time to save for retirement later. If your employer offers some kind of 401k match, failure to save is an even bigger mistake. You are turning down free money from your employer as a reward for something you should be doing anyway, so take advantage of it. The best way to build a retirement savings account is to start early and save on a regular basis. Proverbs 21:5 encourages us to save via steady plodding—small amounts on a regular basis.

If you just have to make an investment because the opportunity is too good to be true, you are fooling yourself. There are always risks with any investment. Promises of instant profits through day-trading or house-flipping are often too good to be true. Keep your greed in check, save for emergencies and your retirement on a regular basis so you don’t have to take big risks by wasting your money on something too good to be true.

If you do have retirement savings, you are fooling yourself if you think the money in your 401k or IRA is up for grabs to spend on your wish list. Cashing out one of these retirement funds early can result in steep penalties, eating into your hard-earned savings.

In addition to the tangible loss of your saved money and the penalties you pay, you still need to save for retirement. Shifting the shortfall from one part of your budget to another is not a real long-term solution. 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 also lose the interest you could have earned on the money you withdrew.

It is really easy to convince yourself that you don’t make enough money to be generous, or that you need the money more than the church does, or that you don’t agree with the way the pastor is spending the weekly donations. These are some of the ways you can fool yourself and justify not giving. But the act of giving comes from what you have, not what you think you need in order to be generous.

Giving is not done because God needs the money, it is done as a way for us to honor him and acknowledge God as the source of everything we have. Acts 20:35 tells us that it is more blessed to give than to receive.

Money is just a tool yet we give it so much more importance than it deserves. We think money will give us happiness, contentment and peace; and the more money we have the better off we will be. But if you aren’t happy with what you have, you will never be happy when you get what you want.

Mark 8:36 asks us to consider “What profit is there for one to gain the whole world and forfeit his soul?”

Join the Compass Catholic podcast to find out if you are fooling yourself about your finances.

Eliminate Holiday Spending Stress

Thanksgiving, Black Friday, Cyber Monday, and Giving Tuesday have all come and gone and the Christmas buying season is upon us. Before emptying your wallet and racking up credit card debt, take some time to think through WHY it is so easy to overspend at Christmas by reading the stories below.

Maria is a divorced mother of two teens. She overspends on the holidays out of guilt, trying to make up for the emotional disruption in her children’s lives by showering them with gifts. She knows deep down that when the credit card bills arrive in January, she will experience terrible anxiety.

Christmas is all about kids, and it can be a magical time where we make lots of happy memories. However, teens aren’t clueless and they can and do understand that money is not an infinite resource. You are not a bad parent if you can’t buy every single thing your kid likes or sees or wants. More to the point, they won’t stop loving you if you fail to provide an avalanche of presents. Let’s admit it, NOT making kids happy is a deep, dark fear that drives a lot of unhealthy financial behavior at this time of year.

Even little ones know Santa only has so much room on his sleigh. If you’re secretly worried a child will reject you over gifts, remember that they want your love, approval, time, and undivided attention. And if you have taught them to value material possessions over these things, you may want to rethink what you are teaching them. Prioritize your budget to spend more on the children than the adults. But balance this against the knowledge that overspending in the short term can be bad for the whole family in the long term.

Let’s look at Tom and Sue who LOVE the holidays and do everything they can to make the season festive and fun. They use a budget during the year, but it gets tossed out the window at Christmas. They would never want to disappoint their twelve nieces and nephews, six siblings, parents, neighbors, friends and even casual acquaintances.  Every year, they overspend their budget in quest of the PERFECT Christmas. And every January, they pay the price in stress, finance charges, and post-holiday misery.

Our own lives can seem messy when we compare them to our friends and neighbors. Top that with multiple media images of perfect families with perfect homes and armfuls of gifts and you have the textbook recipe for a holiday inferiority complex. We are holding ourselves up for scrutiny against an airbrushed, photo-shopped version of other people. But what you see in the media isn’t REAL. For all you know, the neighbors you envy may be up to their eyeballs in debt and their over-decorated house of cards might come tumbling down at any minute.

Make a conscious effort to stop comparing yourself to others. Who cares what other people think? Take a few moments to write a list of the things you truly care about, that bring you real joy and happiness. Shifting your focus can help you to prioritize what is most important, and is most likely to bring you lasting happiness in a way that material goods cannot. You can’t buy a good Christmas, you can only make one.

Emma and Ben have enough money that overspending during the holidays is not a problem. But what really makes them crazy is to see the holiday focus on elaborate gifts while friends and family miss the real reason for the celebrations. They hate seeing gifts that are broken, discarded, or ignored as soon as the holiday has passed. They struggle with the feeling that their money is not being well spent.

This situation is often linked with having one or more demanding, unreasonable family members who are difficult to stand up to. Don’t be a martyr. You can’t actually make people like that happy, so quit trying. There’s no point exhausting yourself and your bank account. Re-think the situation: what’s affordable and comfortable for you?  State your intentions simply without apologizing, justifying or arguing.

For example, “We’re only buying presents for the kids this year.” Sure, it feels weird the first few times you try acting assertively around certain friends or relatives who aren’t used to it, but it gets easier over time.  You can do it without being nasty or looking like the bad guy. The world won’t end if you say ‘no’ every now and then.

Sam and Suzie would never dream of buying presents at the discount store or doing anything other than over the top gift giving, decorating, party throwing and meal planning. Because they DESERVE the BEST! But, every year they get stressed out and the holidays are less than joyful, especially as the credit card bills start piling up in their mailbox.

Christmas is not really about deserving anything, is it?  Either you can afford something or you can’t, however entitled you or anyone else might feel. Do the math. If you can’t afford it, you can’t afford it. There’s nothing wrong with buying the standard version of something, if that’s what your budget allows.

In mid-December, Josie heads to the store for Christmas gift shopping. She doesn’t have a list—only a vague idea of what to buy and who to buy for. She wanders around aimlessly picking up those gifts that seem like a good idea. But when she gets home the gifts are all wrong and she forgot half the things she wanted to buy in the first place.

One of the biggest risks to our budget is panic buying. Feeling rushed or overwhelmed leads us to make snap decisions. We take the easy way out rather than the smartest option, and it ends up costing far more than we’d planned.

To avoid being in debt for months and months during 2019, avoid panic buying. Take a deep breath, calm down, check your budget and develop a detailed list for each person. Then stick to the list! Keep yourself focused and the panicky feelings will be a lot easier to overcome.

The holidays are rapidly approaching, but there is still time to take these proactive steps to avoid finding yourself in a financially stressful situation come January. If you see yourself in one of these situations, rethink what Christmas is all about.

Once Christmas 2018 is finished, we highly suggest saving 1/12 of your Christmas budget each month. If you say you can’t afford to do that, what makes you think you can pay the credit card bills for Christmas 2018, PLUS interest.

After all, the buying frenzy that occurs every year at Christmas has absolutely nothing to do with the baby in the manger, the gift of God made man. The only one and true gift we need at Christmas.

Here’s wishing you an affordable Christmas, and a financially stable New Year.

Join the Compass Catholic podcast for more about eliminating holiday spending stress.

Giving Thanks

Thanksgiving is one of my favorite holidays as it is the only holiday where we gather for the specific purpose of being thankful to the Lord for all that we’ve been given.

All of us face challenges–financial challenges, health challenges, relationship challenges, job challenges, you name it. And those challenges can get overwhelming unless we take a step back and reflect on the goodness of God. Psalm 30:12-13 speaks to this: “You changed my mourning into dancing; you took off my sackcloth and clothed me with gladness. So that my glory may praise you and not be silent. O Lord, my God, forever will I give you thanks.”

In the United States, we live in a time when some people would like to remove every connection between God and country, yet our Founding Fathers clearly saw God as the source of the bounty in this country. On November 26, 1789, our first nation-wide thanksgiving celebration, George Washington spoke of that day as, “a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many and signal favors of Almighty God.”

Many other countries around the world also designate a specific day of the year as their day of thanks. Almost all religions of the world have ceremonies of thanks to God and many are focused around the harvest season. I believe that the origin of giving thanks to God comes from deep within the human heart and it is a natural response to a loving and gracious God.

Attending Mass as a family is a way to thank the Lord. The Opening Prayer for Thanksgiving Day Mass reads: “God and Father of all gifts, we praise you, the source of all we have and are. Teach us to acknowledge always the many good things your infinite love has given us. Help us to love you with all our heart and all our strength.” What a beautiful way to start Thanksgiving Day!

Google “Thanksgiving Bible Verses” and you’ll get about 25 verses to choose from. Ask each family member to pick their favorite and read it aloud before the Thanksgiving meal, then share why they chose that specific verse.

Encourage each person at your dinner table to thank each of the others at the table for something over the past year.  This helps draw everybody closer together as each person shares their personal thanks.

Gratitude is an important virtue. It helps us concentrate on the realities in our life–when we are grateful, it helps us focus on the blessings in our lives instead of the day to day irritations.

During this time of Thanksgiving, it is easy for us to spend a day being grateful, but are we grateful to God the other 364 days of the year for everything he has given us? We challenge you to go beyond Thanksgiving Day and live a life of gratitude throughout the year!

Consider starting a Gratitude Journal. By taking time each day or once a week to write down the things for which you are grateful you can focus on those things that often escape notice but are so important.  Being consciously grateful helps you discover what you take for granted–job, family, freedom, birds, faith, friends, and the very air you breathe.  Each of these things, no matter how important or mundane, is a gift from God for which we should be thankful. Recalling all of the gifts that have come your way is fun to read later, and you can savor those special moments over and over again.

Another way to bring gratitude into your everyday life is to have each person at the dinner table share three things that happened that day for which they are grateful. In a family with young children this can range from the amusing (“I am grateful I didn’t have to sit next to any girls on the bus”) To the profound (“I am grateful I got to see Grandma today–she is getting old.”)  But whether or not there are children in the family, the gratitude discussion at meals helps keep thanksgiving at the forefront.

At bedtime, each of us can spend a few moments in silence to reflect on our day and say a prayer of thanksgiving about the things we experienced during our waking hours. We are showered with blessings from God each and every minute of the day and night and it is right to acknowledge those blessings.

Use your 5 senses to concentrate on the wonder of the world around you.  Touching, seeing, smelling, tasting, and hearing helps us to appreciate what a miracle it is to simply be alive. Once we start noticing the small things around us, it’s easy to get out of our natural tendency to see what is wrong and instead focus on all the little blessings we receive daily

Look for opportunities to thank the people around you and tell them how much they mean to you. Instead of a text, or phone call write and mail a hand-written note to express your thanks. The person who gets it will know you took extra time and thought, and they will appreciate your extra effort. Who doesn’t enjoy getting something personal in the mail, which is such a rarity these days?  When you say “thanks” be specific. Instead of using general phrases like “thanks for your help,” one of the best ways to show your gratitude is to acknowledge something specific about how they helped or what their help meant to you.

By taking time each day to think about how blessed you are, you can focus on those things that often escape notice but are so important.

This year, instead of November 22nd being one day of Thanksgiving, have it be the first day of a year of thanksgiving. “I will praise you, LORD, with all my heart; I will declare all your wondrous deeds. I will delight and rejoice in you; I will sing hymns to your name, Most High.” (Psalm 9:2-3)

To all of you who listen to us on the radio, read our blogs and experience the compass Bible studies, we offer our heartfelt thanks!

We wish each and every one of you a happy and blessed day as we offer thanks together to our God. Happy Thanksgiving!

The Compass Catholic podcast this week shares gratitude stories from our Compass family.

Don’t Go Into Debt for Christmas

Halloween is just finished and we are getting ready for Thanksgiving. Yet all the big box stores have been featuring twinkle lights and Christmas trees for weeks! 

We rush from one frantic buying season to another without even thinking about what the holiday is and why we should be celebrating. Unfortunately, this puts a lot of financial pressure on people to spend money they may not have.

Many parents are beginning to wonder how they’ll fund the Christmas holidays this year. According to CNN, two-thirds of America’s gift giving families spend more than they can afford, meaning many parents will go into debt to buy Christmas presents this year. They’ll use credit cards for Christmas spending, run up a big balance, and the Christmas bills will get paid off just about the same time the whole cycle restarts next year.

Other people will take more drastic measures to fund their Christmas purchases, such as 11% taking funds from their retirement account, 14% using their emergency fund, and 11% taking out a payday loan.

Christmas should be about creating memories, not about creating debt, stress or future financial problems. Christmas is a wonderful time of year, but it isn’t worth putting your long-term financial security at risk in order buy presents or to try and keep up with some false concept of what Christmas is all about.

It might seem harsh, but you don’t have to buy gifts for all your family, friends, neighbors, coworkers and acquaintances. Not everyone has the budget to give a beautifully wrapped gift to everyone in their life.

For many of us, being able to give amazing expensive gifts would be nice and we like to be generous, but the reality is that we simple can’t afford to be Santa to all the people in our lives during the holidays. Making everyone you love feel special at Christmas is awesome but it’s not worth sacrificing your financial future. Think about ways to create special fun times without going on a spending spree.

If you’re from a large family, suggest that you each pick a Secret Santa. That limits the gift buying to one person and makes it much less stressful and expensive.

Or try a white elephant gift exchange game where everyone just brings one wrapped gift, and there is usually a $$ limit on the gift. As people arrive, pile the gifts in one location and hand them a numbered slip of paper. When it’s time to open gifts, the person with #1 chooses a gift first. Person with #2 can either “steal” the gift from #1 or take a gift from the pile. Set up your own rules about how many times a gift can be taken and if gifts can only be taken once in a round.

This is a fun time, involves everyone, and is a simple way to give gifts to the family while also maintaining a dollar limit on your spending. In addition, it eliminates the financial stress of buying something special for each person in the family.

You can always make cookies for your neighbors or your children’s teachers or buy a $5 gift card to a local coffee shop. Attach a handwritten note saying how much you appreciate them and how they have touched your life. A personal message will mean more to people than an overpriced item they aren’t going to use. Try to think of all the ways that you can tell the people in your life that you appreciate them and be thoughtful without breaking the bank. The truth is that there are plenty of ways to spend less than you did last year on Christmas presents and still give the people in your life gifts that are both special and personal.

If you’re accustomed to shopping in person for your gifts every year, consider shopping online this time. The online experience can be much more peaceful and thoughtful than battling the crowds at the mall, or succumbing to the pressure to buy SOMETHING just to get out of the mall.

Don’t tie gifts to your worth as a parent. Kids don’t care whether or not their gifts are brand new. They don’t care that you spent hundreds of dollars to make sure they had the hottest gift of the year. We all know that if you put four massive cardboard boxes in your living room on Christmas morning your kids will have a ton of fun (unless they’re teenagers). So, try to relax. You’re not a bad parent if you limit your spending or buy your child a bike at a garage sale.

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.

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. So, don’t put too much pressure on yourself. And don’t set unrealistic expectations for the kids where every gift-giving event is over the top. They aren’t going to count each gift and ask the price of everything under the tree. And if they are counting gifts and calculating how much you spent, what does that say about what you’re teaching them?

Going into debt for Christmas presents prevents you from reaching your long-term financial goals, like paying for your kids’ college tuition, paying off debt or funding your retirement. Every time you go into debt to buy a present, you’re choosing a physical object over your long-term financial security. 

Before you do any shopping, you should be able to answer these questions: What is your total Christmas budget, including gifts, food, decorations and travel? What is your Christmas budget for GIFTS this year?  How much do you plan to spend on each person? What gift will mean the most to each person?

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.” Don’t become a slave to our culture’s ideas of what Christmas should be!

Keep your eyes focused on Christ—the reason for this season—and not on what you feel forced to buy! Start planning now and don’t go into debt for Christmas.

The Compass Catholic Podcast has more about how to stay out of debt this Christmas.

Money Matters in Marriage

When couples say their vows at the altar, they don’t promise to be completely open and honest about all their financial information from this day forward.

Maybe they should.

If the husband and wife aren’t honest with each other about their entire financial situation, it can lead to big problems in a marriage.

If money isn’t an open topic that is easily discussed, money challenges can become a way of life. A secret bank or credit card account; spending $500 or more on a purchase without telling their spouse; missing cash in the bank accounts and hiding expensive purchases all break down the trust required for a strong marriage.

Differences about money can put a divide between husband and wife. When spouses don’t share financial information with each other it can often lead to divorce.

Our culture pushes us toward thinking that money is the most important aspect of our life and will ultimately make us happy and fulfilled. This leads us to think finances are an individual matter and it is OK for a married couple to keep their finances separate.

Advertisers manipulate us with their consistent messages about what we have to buy in order to happy and successful. Their focus isn’t about the product meeting our needs. Rather the focus is on sex, wealth, power and prestige. The ads encourage us to buy what we deserve, rather than what we need or can afford.

Our culture also encourages debt, which cripples the family finances. Over half of U.S. adult population has at least two credit cards and 14% have more than 10 credit cards. The average consumer has 13 debt obligations on record at the credit bureau (credit cards, mortgage, student loans, car loans, lines of credit, etc.)

When you add the pressure from society to the typical amount of debt families have, the situation gets even worse. Even though they seem to be doing well, you never know the hidden financial problems in many marriages. The average household credit card debt equals a little over $16,000. But it’s not unusual for families to have $20,000 – $40,000 in credit card debt. We’ve met several couple who had close to $100,000 in credit card debt.

With younger families, there is also student debt—anywhere from an average of about $40,000 to as much as $200,000. Then there are car loans, adding another $15,000 to $70,000 to the debt total. Most families have a mortgage to round out their debt portfolio—in the neighborhood of $150,000 to $200,000.

When it’s all added together, it’s easy to see how a couple could have $300,000 – or way more in debt.

It’s also easy to see why they don’t want to talk about it

Lack of communication in marriages can be troublesome, especially if the topic is about money (or lack of money). Money is a taboo subject in many families as talking about money makes people uncomfortable. Many couples don’t want to talk about money because they are afraid of the conflict that might develop. It is easier to keep spending and ignore the looming problem.

A lot of times these couples simply don’t know HOW to talk about money or what to do to dig out of their financial mess. But not talking about money in an open positive manner will definitely create conflict!

Bishop Robert McElroy of San Diego recently said: “The Church must always be enmeshed in the real lives and sufferings and challenges and joys of the people of God and the whole of humanity.”

The Church can go a long way in helping couples build a stronger marriage by giving them easy ways to talk about money. But when does the Church actually teach/talk about money? For most Catholics, the only time they hear about money in church is when there is a need for fundraisings, such as enhanced offertory, capital campaigns or missions.

Even the marriage preparation programs cover finances at a high level with almost no tactical detail. They do mention the importance of using a budget or avoiding debt. But do they talk about sharing credit reports and credit scores or how much each spouse can spend without a conversation, or lifestyle limits (how much is enough)?

Sharing dreams and goals and plans in any area of a marriage makes the couple much stronger and builds bonds between husband and wife. People who say they have a “great” marriage discuss their money dreams with their spouse. But beyond dreams, couples who talk about money on a regular basis are happier in their relationships than those who discuss finances less frequently.

Many priests don’t talk about personal money matters because they don’t think about it, don’t think it’s their role or they lack skills to do it. They don’t see the correlation between faith and finances. But aren’t we supposed to live our faith in every area of our life?

Unfortunately, most married couples learn about finances through Trial & Terror, which mean years of conflict and pain and arguing about money.

As a church, we need to teach people that their faith and their finances go hand in hand towards having a stronger marriage.

Money Matters in Marriage!

We have resources to help couples talk about money wrapped in the word of God:

Navigating Your Finances God’s Way is a 9-week small group Bible study; Set Your House in Order is a 5-week small group study and God Marriage & Money is a resource to help couples who are engaged to be married have the money talk before money becomes a problem.  Contact us for more information.

Listen to our podcast. 

Things Frugal People Never Do

In the many years we have been in this financial ministry, we have discovered some consist things that people who are careful with money never do. 

Try some of these – they will definitely improve your bottom line!

People who are money smart avoid borrowing money. Think about the paradigm of our society—it’s normal to go into debt to buy whatever you want. Of course, most people cannot afford to buy a house with cash, but how many people go into debt for a new car, a flat screen TV, clothes, the latest version of a smartphone and restaurant meals?

Frugal people always pay cash for anything and everything they can. They have learned the secret of saving for what they want and they avoid wasting money paying interest. They pay cash for their cars. They pay cash for the new TV. They don’t use debt to pay for new clothes. Frugal people know that paying interest means throwing money away!

How do they pay cash for so many items? It’s called an escrow account. Chances are if you own a house you already have an escrow account for property taxes and home insurance through your mortgage company. Your monthly mortgage payment consists of PITI (Principle, Interest, Taxes, and Insurance.) Each month when you make your mortgage payment, some money is put into a savings (escrow) account to cover your yearly insurance and tax bills.

In the same way, you can set up your own escrow account to pay for large purchases. If you need to replace your car in a few years, save a little each month—in advance—to pay cash for a good used car. If you plan to take a vacation this summer, save a little each month in advance so you don’t come home from vacation to face a mountain of debt. If you want to avoid the avalanche of Christmas bills in January, start saving now for Christmas 2019.

If you think it’s impossible to save in advance, then ask yourself why you can afford to pay for the item plus interest after you have charged them on your credit card. Paying interest significantly increases the cost of what you’re buying.

An escrow account is different than an Emergency Fund. An Escrow Account is money that you are saving up for future planned expenses. An Emergency fund is for unplanned expenses.

Besides avoiding interest payments and carefully planning future purchases, frugal people avoid window shopping. Why? Because if you are shopping for entertainment you will probably spend money on something that really isn’t necessary! Someone told me that every time they go to the mall just to walk around, they spend money. My response? Don’t go to the mall! If you shop for entertainment, you will eventually find something that you really don’t need but can’t live without.

Frugal people don’t collect stuff. Typically, they will recycle 90% of their stuff to a worthy cause and it works because they don’t buy a lot of stuff to begin with. St. Vincent de Paul Society, Catholic Charities, and Parish flea market sales are all good places to donate things you no longer need or use. How many times do you look at all the stuff in your closet, drawers, and garage and see things you don’t need and haven’t used in years?

Frugal people don’t take their monthly bills at face value. They are always on the lookout for ways to cut expenses like cable bills. Cable can run as high as $80 – $150 for 100+ channels. How many of those can you reasonably watch? There are many alternatives that will give you most, if not all, of the normal programs you watch for $10 – $15/month.

A PEW research study shows that 95% of Americans now own a cell phone and 77% of Americans own a smartphone. Frugal people are ditching the landline. And saving even more money, frugal people don’t upgrade their smartphones as soon as a new model comes out. If your current phone works and does everything you need it to do, why spend the money to upgrade? And if most of the calls you make and receive are on your cell phone, why have a landline?

Frugal people don’t ignore their budget. Using a budget means you have a plan for every penny! Unless you know exactly where your money is going, how do you know if you are using it wisely on what is most important?

Frugal people don’t go to restaurants as a regular habit. You can cook for two people for way less than you will spend in a restaurant for just one meal. And frugal people never throw away leftovers. When you put leftovers in the fridge, have a plan. Will they be used for lunch or will you have a potluck dinner from the fridge later in the week?

Frugal people don’t pay fees. Whether it’s overdraft charges, late fees, bank account fees or yearly fees for the privilege of using a specific credit card, frugalistas avoid fees.

The most important thing frugal people don’t do is to try and live someone else’s life. They don’t compare what they have to what other people have. They don’t buy things just because everyone else has one and they understand the psychology of advertising so they don’t fall for all the ways advertisers manipulate us. It may seem like some of your neighbors, friends and relatives have so much more than you do, but you never know how much debt is behind all that stuff.

Social media is causing a lot of people to go into debt because they see perfect lives on social sites. In reality, people only post their best parts of their day. They would never post their credit card bill, how much debt they actually have, or how much money they are wasting in interest payments.

Being frugal is like being content—focusing on what you have instead of being in a constant state of wanting more and more.

In Philippians 4:10-14, Paul says that he learned to be content in all circumstances.  Learning how to be frugal will take you a long way down the road to also learning to be content.

Listen to the Podcast

Is the Lottery Calling Your Name?

Should a Catholic buy lottery tickets? Is it a sin? But what if I win? Think of all the good things that I could do and all the people I could help.

Let’s look at the lottery from a secular point of view and then we’ll look at it from a Catholic perspective.

This summer we have seen several different lotteries reach all-time highs. Mega Millions was worth over a billion dollars million and people were standing in line to buy tickets. When they finally got to the front of the line, they were tempted by all those other lotteries paying big money.

Logically, your odds of winning are abysmally low. You have a 1 in 259 million chance of winning Mega Ball. For Powerball the odds are 1 in 292 million. Your chances are much better for getting struck by lightning (1 in 13,500); dying in a car accident (1 in 645); being a victim of identity theft by the age of 40 (1 in 6); getting bitten by a dog while out for a jog (1 in 133); or even getting a hole-in-one on your birthday (1 in 25,000).

The average American buys $200 of lottery tickets per year. If you live in Massachusetts you will average $735 per year!

What about the scratch-off tickets? They’re easier to win, right? A survey was done by a company that bought $1,000 of scratch-off tickets. Their winning average was 22% and they won $974; their winnings did not even cover the $1,000 they spent buying tickets.

If you are one of the lucky people who win the lottery, you may be in the 70% of winners who end up broke in just 7 years, and many go broke much faster than that. There is a very small percentage of lottery winners who actually do quite well with their winnings, but your odds of doing well are almost as bad as your odds of winning.

The Federal Trade Commission (FTC) has truth-in-advertising laws that prevent advertisers from making false claims about the benefits of their products. That’s why you see so much long legal language on ads for auto leasing, and why there is a long list of potential side effects on ads for drugs. State Lotteries are exempt from the FTC truth in advertising laws so don’t believe everything the lottery commercials tell you!

Let’s look at the lotteries from a spiritual perspective. What does the Bible say about playing the lottery?

1 Timothy 6:9-10 tells us, “Those who want to be rich are falling into temptation and into a trap and into many foolish and harmful desires, which plunge them into ruin and destruction. For the love of money is the root of all evils, and some people in their desire for it have strayed from the faith and have pierced themselves with many pains.”

Based on this verse, playing the lottery, focusing on accumulating or winning money and getting rich can lead to spiritual suicide. The Catechism has a section for our examination of conscience prior to the Sacrament of Reconciliation. One of the questions we are to ask ourselves is: “Have I squandered money on gambling?”

In the Gospel of Matthew, chapter 25 we read The Parable of the Talents. In this parable, Matthew goes to great lengths to describe a faithful steward who was responsible for managing the owner’s funds. A steward must be trustworthy. A steward doesn’t waste or foolishly spend the property they are administering. Wasting money would include playing the lottery in hopes of becoming rich.

Everything we have comes from God—it all belongs to him. Our job is to be a good steward of all the blessings God has given to us, which means managing our possessions wisely in a way that honors God.

Who do you really love, money or God? If you are looking for a get-rich-quick scheme, you are focused on money. Gamblers, which includes lottery players, typically covet money and the things that money can buy.

God forbids covetousness: “You shall not covet your neighbor’s house. You shall not covet your neighbor’s wife, or his male or female servant, his ox or donkey, or anything that belongs to your neighbor” (Exodus 20:17; see also 1 Timothy 6:10).

One of the world’s lies is that money is the answer to life’s problems. People are lured into playing the lottery with promises that their lives will improve if they can only hit the jackpot. If they can just get lucky with the numbers, their problems will disappear. Such thoughts are empty promises. (see Ecclesiastes 5:10–15). “The covetous are never satisfied with money, nor lovers of wealth with their gain.”

If you think playing the lottery is just a form of entertainment, be cautious! There are many better ways to spend your money and more intelligent forms of entertainment.

Once we start playing just for fun it could eventually become more than just fun. It could become an addiction, especially if you play the same numbers each week. You become caught in a “what if” trap. “What if the week I don’t play is the week my special numbers win?”  Buying a lottery ticket here and there is not a sin, but greed is. If you play the lottery on a regular basis, you should prayerfully examine your motives. But we would encourage you not to do it at all!

Wealth and possessions by themselves are meaningless unless they can be used to serve the Lord’s purposes. “The Lord grieves over the rich because they find their consolation in the abundance of goods.” Luke 6:24

King Solomon was in a position to know whether money would bring true fulfillment. He was one of the richest people in the world, yet his conclusion about riches was, “Useless, useless . . . it is all useless!” (Ecclesiastes 12:8) Nothing, not even winning the Mega Millions lottery can replace the value of our relationship with the Lord.

Are you sacrificing a close relationship with Christ in the pursuit of wealth?

Join us on the Compass Catholic podcast for more about why playing the lottery is not in your best interest.

Cheap vs Frugal—Is There a Difference?

What some people call being frugal, other people call being cheap.  But there is a difference between the two.

The dictionary definition of cheap is: not costing a lot of money; of low quality; not worth a lot of money; not willing to share or spend money.

The definition of frugal is: careful about spending money; using money or supplies in a very careful way.

A cheap person will invest a lot of time and energy in order to save a dollar or two, but the time and effort they expend may not be worth the amount of money they save. A cheap person will spend an afternoon repairing a $2 piece of equipment.

Their whole focus is dollars and cents, without regard to other areas of their life. They’re also willing to take advantage of social situations to avoid spending money. To me, cheap has a negative connotation, as it refers to a person who often doesn’t consider the value of their time, their energy, or the friendship and goodwill of others. They value money above all else, and they may make spending choices that can alienate others socially. A cheap friend will demand to go to the least expensive restaurant, regardless of what anyone else in the group thinks. They are the person who will pay for their part of the meal precisely down to the penny, but not include any money for the tip.

A frugal person wants to spend less money but the money-saving decisions are made with a balanced lifestyle in mind. A frugal person knows enough to balance saving money against other areas of life such as time, energy, friendship, faith, love, and health. The frugal person tends to account for the impact on things such as relationships when deciding if a money-saving tactic is worthwhile.

A frugal person might haggle for a lower insurance bill, but never take advantage of friends in a social situation. A frugal person might reuse a takeout container but won’t invest the time to wash a flimsy sandwich bag.  A frugal person will make small sacrifices of their own resources—time and energy—to save money, but they generally won’t impinge on others to do so, nor will they sacrifice large quantities of their own resources to save a few pennies.

Here is an example of the difference between being cheap and frugal. There are two different types of trash bags in the store. The price on the first one is $30.00 for 300 bags or $0.10/bag.  The price on the second one is $25.00 for 200 bags or $0.12/bag.

The ten cent bag sounds like a better deal, doesn’t it?

But taking into account the entire picture, the $0.10 bag the cheap person bought is so flimsy, two bags are needed to hold the trash, making the cost per use $0.20. The bag the frugal person bought cost $0.12 cents each, and had the more expensive purchase price, but was $0.08 cheaper per use.

In order to be frugal, not cheap, it is important to compare both the price you pay when you buy something against the cost per use for that same item. A cheap person merely looks at the price but the frugal person views the larger picture and considers the overall cost.

Being frugal means balancing money savings against other factors. You can save money where it makes sense, but you will also pay more for a product where paying more is a better deal for your whole lifestyle.

Here’s another example. A person jogs for exercise. The frugal person will buy the running shoes that best protect their feet and are appropriate for their use. Their decision is made with their overall health in mind, not simply the cost of the shoes. However, they will take advantage sales or coupons to buy that running shoe as inexpensively as possible. The cheap person simply buys the least expensive shoes whether or not the shoes will offer proper support and protection.

Cheap people use price as the bottom line. Frugal people use value as the bottom line.  

Cheap people are driven by saving money regardless of the cost. Frugal people are driven by maximizing total value, including the value of their time, effort and the use of the product.

Being cheap is about spending less; being frugal is about prioritizing your spending so that you can have more of the things you really care about. 

Cheap people are often afraid to spend money. They are willing to sacrifice quality, value and time in order to cash in on short-term savings.

Frugal people are resourceful with their spending; maximizing their dollars, so that they can fund big-picture wants and dreams.  

I consider myself to be frugal. I plan lunch and dinner so we use every bit of leftovers. I use up every bit of the products we buy by standing ketchup and other bottled products on their head to completely empty the bottle. I use a teeny tiny spatula to get all the product out of a make-up tube. I cut off the end of a toothpaste tube to get a few more nurdles of toothpaste out of it.

But I do not see myself as cheap. I do everything possible to maximize the money we do spend. But I also splurge on the areas where I am passionate (and where the money is in the budget!).

While we DO encourage people to be frugal, we do not encourage you to be so cheap that your life is miserable. Being a good steward means a balancing act by spending money on what is important to you and saving money in those areas that are not so important. Being frugal is about balancing income, giving, saving and spending with a stewardship mindset.

Be frugal, not cheap. Proverbs 28:22 tells us “Misers hurry toward wealth, not knowing that want is coming toward them.”

Life is short—enjoy it but be responsible!

Join us on the Compass Catholic podcast for more about why being frugal (not cheap) is important!

Social Security – Will it be There for You?

Well, the answer to the title question is … Maybe!  Depends on how you are thinking about Social Security. If you consider the original intent for social security the answer is YES. It will probably be there to supplement your retirement savings.  If you consider the way many, if not most retirees use Social Security, the answer is NO! Social security is only supposed to supplement your income. It is not designed to provide your entire retirement income, so you need to save for retirement.

It’s up to each one of us to stop relying on the government to take care of us in retirement.

There are approximately 3,650,000 boomers who will retire each year for the next 10 years, which will put a huge crunch on Social Security and Medicare.

Starting in 2018, Social Security will begin to draw down trust fund reserves to help pay for benefits. Although Social Security has a long-term financial shortfall that must be closed, the program’s combined trust funds will not be depleted until around 2034, which gives policymakers time to develop a carefully crafted solvency plan.

To eliminate Social Security and Medicare would be political suicide for Congress, but Congress may be forced to cut benefits, raise taxes, increase the eligibility age, or some combination of the three to cover the cost of the program.

For the 52% of Americans who rely on Social Security for more than half their retirement income and the 25% of retirees who get more than 90% of their income from the program, that would be a disaster.

The average retirement savings in America is $60,000 and the average Baby Boomer has saved $103,000 for retirement. The projected lifespan in the US is about 85 years. If you retire at 65 and live till 85, your retirement savings has to last for 20 years. Eliminate or decrease Social Security benefits and that $60,000 won’t last very long.

If you are younger than 60, you need to be saving as much as possible for retirement. If you retire at age 65 you will need to have saved about 8 times your annual salary to cover your living costs in retirement. The chart below shows how much you should have saved for retirement at age 65 based on your salary:

  • $50,000 x 8 = $400,000
  • $75,000 x 8 = $600,000
  • $100,000 x 8 = $800,000
  • $125,000 x 8 = $1,000,000

Are you saving enough???

Proverbs 21:20 tells us “Precious treasure remains in the house of the wise, but the fool consumes it.” Are you consuming your treasure?

We have had 10 years of a bull market and we don’t know when it will stop, but we can guarantee that it will stop at some point and we’ll be in a bear market. Everybody needs to realize this and be prepared.

What are your plans to make sure that you are prepared for a market downturn? If you are already retired, how much money do you have access to in liquid assets, which won’t devalue during a bear market? You want to be in a position where you don’t have to sell depreciated assets when the market decreases. If you are within 5 years of retirement, you should be thinking the same way.

If you have 10 or more years before retirement, what will you do to take advantage of reduced stock prices? Will you be buying or selling?

As we approach the inevitable bear market, you want to pay off as much of your credit card and consumer debt as possible and increase your emergency fund to a minimum of 6 months.

You probably can’t do everything at once and that’s why it’s so important to have a balanced budget, manage your spending and keep debt to an absolute minimum at all times.

We don’t know when the bear market will begin, so it’s important not to delay. Take advantage of the time you have prior to the bear market to get your finances in order. If you’re in good financial shape when the bear market hits, you might be able to take advantage of it and continue to dollar-cost-average your investments and buy more stock at reduced prices.

Since 1934 there have only been four bear markets when the average of the S&P 500 dropped more than 20%. The most recent was in 2008 when it declined 37%. Despite bear markets, more good than bad has prevailed. In a look at five year rolling time periods it’s 76% up, 24% down. Looking at ten year rolling time periods, it’s 88% up, 12% down.

In order to be prepared for those inevitable downturns, you should plan on having 12-18 months of liquid investments if you need would need to live off your savings. Note we didn’t say everything should be liquid, only the money you may need to live on for one to two years. The rest should stay invested per your normal plans because the first six months of recovery can often create the largest gains and if you are not invested you will miss out.

We need to have a Joseph mentality. Joseph saved during seven years of great plenty (Genesis 41:29) in order to survive during the seven years of great famine (Genesis 41:30.) Like Joseph, we need to prepare for the future by saving.

We also need to be diversified in our investments. Money can be lost on any investment. Stocks, bonds, real estate, gold—you name it—can perform well or poorly. Each investment has its own advantages and disadvantages. Since the perfect investment doesn’t exist, it is important to diversify. “Make seven or eight portions; you know not what misfortune may come upon the earth.” Ecclesiastes 11:2

The wisdom of diversification applies to both where we investment AND to how we plan to use Social Security.

Join us on the Compass Catholic podcast for more about your retirement future and Social Security.

Are You Headed for Financial Disaster?

Are you living paycheck to paycheck, worrying about debt collectors or finding it impossible to make ends meet?

If you are experiencing financial challenges, you’re not alone. Whether your debt is the result of an illness, unemployment, or simply overspending, it can seem impossible to manage.

A lot of people in this situation take out a second mortgage or home equity line of credit, which may solve your immediate problem and allow you to consolidate your debt.  But these loans require your home as collateral and if you can’t make the payments, your home is at risk of being repossessed.

And if you have not changed your spending habits, chances are that second mortgage or home equity line of credit will provide temporary relief but it won’t be a long-term fix.

Financial issues don’t happen overnight—they creep up gradually. If you have drifted into a situation where your finances feel out of control, the best thing you can do is get them under control before they spin into a full-blown disaster.

If you are behind on some bills, talk with your creditors. They may be willing to work out a modified payment plan and the more proactive you are about contacting them, the more likely they are to help. Be persistent and polite. Have good records of your current finances, so you can clearly explain your situation and propose a solution. Your goal is to work out a modified plan that reduces your payments to a level you can manage.

If your creditors are not willing to work with you, bankruptcy may seem like an easy fix, but it is not. A recent major change to the bankruptcy laws requires you to get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief.

Most reputable credit counselors are non-profit and offer services at local offices, online, or on the phone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. Your financial institution, local consumer protection agency, or friends and family may also be good sources of information and referrals.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. The counselors discuss your entire financial situation with you, and help you develop a personalized plan to deal with your financial challenges.

An initial counseling session typically lasts an hour, with an offer of follow-up sessions. A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. Avoid organizations that charge for information. If a firm does that, consider it a red flag and go elsewhere for help.

You can find a state-by-state list of government-approved organizations at https://www.justice.gov/ust/credit-counseling-debtor-education-information This is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. This page has many resources from credit counseling to debtor education to frequently asked questions. 

Once you’ve got a list of counseling agencies in your state, check them out with your state Attorney General and local consumer protection agency, which can tell you if consumers have filed complaints about any agency. But even if there are no complaints about them, don’t consider it a guarantee that they’re legitimate.

After you’ve done your background investigation, you will want to interview several credit counseling agencies. Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan as your only option before they spend a significant amount of time analyzing your financial situation.

Find out about their fees—either an initial or monthly fee and get a specific price quote in writing. Check out any formal written agreement or contract and never sign anything without first reading it and understanding it.

Check out their qualifications to be sure they are licensed in your state and see if they are accredited or certified by an outside organization, then check out the certifying organization thoroughly.

Ask about confidentiality. What assurance do you have that your personal information (including address, phone number, and financial information) will be kept confidential and secure?

Find out how the employees are paid. If they are paid more if you sign up for certain services, or if you pay a fee, or if you make a contribution to the organization, consider it a red flag and go elsewhere for help.

Beware of any organization that tells you it can remove accurate negative information from your credit report, because legally, it can’t be done.

Once you have worked with the counseling agency to develop a plan, contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the credit counseling organization. 

Make sure the organization’s payment schedule allows your debts to be paid before they are due each month. Paying on time will help you avoid late fees and penalties. Review the monthly statements from your creditors to make sure your payments were received and applied properly to your account.

If your debt management plan depends on your creditors agreeing to lower payments or eliminating interest and finance charges, or waiving late fees, make sure these concessions are reflected on your statements.

The best advice we can give you is to stay on top of your finances on a regular basis and don’t let your spending habits and debt overwhelm you.

Sirach 20:11 tells us “A man may buy much for little but pay for it seven times over.” Paying seven times over may refer to the interest we pay on debt. We can also pay seven times over when we are overwhelmed by financial stress, and we lose our peace of mind!

If you have ANY inkling that your finances are headed for disaster, address problems as soon as you see them coming. The longer you wait to get your finances under control the more of a mess you’ll have to clean up.

One of the most important things you can do in tackling a financial problem is to pray. If you are married, both of you should pray together on a regular basis for the strength and wisdom to be good stewards of the blessings God has given to you.

Join us on the Compass Catholic podcast for a conversation about addressing a financial disaster.