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.

Navigating Your Finances God’s Way – Crisis, Perspective and Eternity

We’ve all faced a crisis, whether it’s a job loss, serious illness, birth of a special needs child or the death of a family member. These situations and many more can turn our world upside down.

Think about crisis stories in the Bible:

  • His brothers sold Joseph into slavery.
  • In a few hours, Job lost everything—his children, wife, all of his financial resources, even his health.
  • Moses was caught between the Red Sea and the most powerful army in the world.
  • Daniel was thrown into the lion’s den.
  • Paul was beaten, stoned and left for dead.

It would have been easy for any of these people to have felt abandoned by God, yet in each case, God used their crisis for good.

James 1:2-4 sums up a crisis situation best: “Consider it all joy, my brothers, when you encounter various trials, for you know that the testing of your faith produces perseverance. And let perseverance be perfect, so that you may be perfect and complete, lacking in nothing.”

God uses all circumstances, even difficult ones, for our ultimate good. A crisis can give us the opportunity to grow closer to God, to learn things we just could not learn any other way, or to renew our faith.

When we are hit with a crisis, there is usually a financial impact, normally through decreased income or increased expenses. The best way we know to prepare for the financial impacts of a crisis is to take the Compass Catholic Bible Study Navigating Your Finances God’s Way. If your finances are in good order, the crisis can be a little less stressful.

One of the exercises In the Navigating study, is to prepare a crisis budget. This can be done by cutting your expenses by a percentage (40% or more) or by figuring out the most likely crisis and cutting your budget to meet the circumstances of that crisis. 

For example, if you were to lose your job, how would you survive financially? Or if you are paid a commission on sales and have a bad season, how would you adjust your finances? Or if you have a significant medical crisis, how will your income and expenses be affected?

Having the discussion before the crisis makes it easier to make objective decisions, not decisions based on emotion and having a plan will give you a sense of peace.

Most times people will face financial challenges in a crisis by using credit cards to maintain their standard of living. This is dangerous because you not only have a reduced income and increased expenses, you are adding debt payments to your expenses, plus interest, so the whole situation can quickly spiral into financial chaos.

The important thing is to know how much you spend on a monthly basis, and where you can modify your spending—that is the only way you can possibly be prepared to adjust in case of a crisis. As soon as there’s the slightest possibility of a crisis, implement the crisis budget. For example, in most cases if there are layoffs at work, you can see them coming maybe weeks or even months in advance. 

When you implement the crisis budget proactively, the worst thing that’s going to happen is you’ll save some money if the crisis never occurs. The best thing that will happen is that you will survive the crisis with minimum financial damage.

The other topic that wraps up the Navigating study is our perspective on eternity. The main idea of this topic is that we are called to be good stewards and to integrate our faith into every aspect of our life—even how we manage money and possessions.

Scripture lays out guidelines from the book of Proverbs that highlight examples of being a good steward:

  • We should not be lazy: Proverbs 19:15 “Laziness brings on deep sleep, and the sluggard goes hungry.”
  • We should not be greedy: Proverbs 23:4 “Do not wear yourself out to gain wealth, cease to be worried about it.”
  • We should not make hasty decisions: Proverbs 21:5 “The plans of the diligent end in profit, but those of the hasty end in loss.”
  • We should be generous: Proverbs 21:13: “Those who shut their ears to the cry of the poor will themselves call out and not be answered.”
  • We should avoid debt: Proverbs 22:7: “The rich rule over the poor, and the borrower is the slave of the lender.”

These verses are clear and simple and easy to understand.

Analyzing our daily life to see if we are living these principles can be difficult. It means scrutinizing our actions and their motivation. Am I lazy? Am I greedy and hasty? Am I generous? Am I overrun with debt?  Am I being a good steward of God’s blessings?

In too many parishes and dioceses, stewardship is a word that often causes Catholics to think of fund-raising. The word ‘stewardship’ is used, but what we hear is “The parish or diocese needs more money.”

True stewardship is a way of life and it’s an important tool in our faith. Stewardship means living in a way that pleases God in all areas of our lives—even when it comes to our own personal finances.

The purpose of our lives is to help us to better know, love and serve the Lord. When we place God first, everything else in our life falls into place. Being able to walk away from money and possessions for Christ reveals a pure heart. Too often we give money first place in our hearts—a place where God should be.

In the big scheme of things, money is a small thing. Simply put money is stuff we use to get other stuff. We should be much more concerned about our spiritual life and pleasing God than about how much money and stuff we have.

In John 10:10 Jesus is quoted, “…I came so that they might have life and have it more abundantly.” Jesus said that we would have an abundant life. Too many times what we hear is that we are supposed to have abundance IN life.  That we should have wealth, that all the riches we desire should be ours.

Constantly striving for wealth, material success and keeping up with the neighbors won’t provide us with an abundant life. An abundant life isn’t based on your accumulation of material wealth, it is based on your attitude and love for your fellow man and what you actually do with the wealth you already have. If you have a heart for freely giving and sharing—first to the Lord and then to your brothers and sisters, you will have an abundant life.

Mastery over money gives us a deeper ability to know, love and serve the Lord. As we better know, love and serve the Lord we become more obedient in all areas of our lives. As we become more obedient, the Lord bestows greater blessings on us; blessings such as peace, understanding, contentment, joy, and grace. Earthly blessings are fleeting and will never stand the test of time, but gifts from the Lord are everlasting.

It may take some time to change your mindset and adjust your attitude. But once you start living a total stewardship lifestyle, nothing is the same.

And that’s a good thing!

Listen to the Compass Catholic podcast for more on this topic.

Navigating Your Finances God’s Way: God’s Part, Our Part and Debt

People are curious about the Navigating Your Finances God’s Way Bible study. This blog and the next three that follow will provide you with an overview of the study and details about the topics covered.

The Navigating Your Finances God’s Way study is done in a small group with no more than 12-14 people including two facilitators. The group meets for two hours each week for nine weeks.  Facilitator training is available online through a short document and a series of videos. The study is designed to provide you with a way of looking at your finances through the eyes of our Catholic faith. The purpose of this study is to help people become better stewards of the blessings God has given them, whether it’s a little or a lot. The Bible study is integrated with practical activities related to personal finances. (NOTE – no one is ever asked to divulge any personal financial information.)

Prior to the first meeting, the participants read the book Your Money Counts (you can access a free ebook of Your Money Counts here).

We start the study in week one by discussing the book Your Money Counts along with the questions related to the Bible readings. This first gathering sets the tone for the small group environment by having everyone introduce themselves as they get to know each other.

The main topic in the second week is the difference between God’s part and our part when it comes to finances. The first eye-opener for most people is that God owns everything. Psalm 24:1 tells us, “The earth is the LORD’s and all it holds, the world and those who dwell in it.” The Bible even mentions specific things that God owns: Haggai 2:8 reads “Mine is the silver and mine the gold—oracle of the LORD of hosts.”

In Genesis 1:28, after God created man and woman, he blessed them and told them that they had “dominion” over the earth. He did not give us ownership—he gave us dominion, which is defined as “controlling power” not ownership.

In Luke (14:33), we hear Jesus say that “None of you can be my disciple unless you give up everything that you have.” The problem is not the material possessions we have, the problem is that we tend to give our stuff a level of importance it does not deserve. God should always be first and foremost in all things.

In order to acknowledge that everything comes from God, try meditating on 1 Chronicles 29:11-12, “Everything in heaven and earth is yours, and you are king, supreme ruler over all. All riches and wealth come from you; you rule everything by your power…”

God owns everything and the word that best describes our part is steward. A steward is a manager of someone else’s possessions. The Lord has given us the authority to be his stewards and our responsibility is summed up in this verse: “Now it is of course required of stewards that they be found trustworthy.” (1 Corinthians 4:2)

The Catechism of the Catholic Church tells us: “As Christian stewards, we receive God’s gifts gratefully, cultivate them responsibly, share them lovingly in justice with others, and return them with increase to the Lord.”  (USCCB; United States Catholic Catechism for Adults; (Washington, D.C. July 2006); pp 450)

If this mindset is foreign to you, don’t be discouraged. It takes time and lots of prayer to change what our secular society tells us is important to what our faith tells us in important. It’s easy to find areas where we haven’t been faithful. The critical task is to be faithful regardless of how much God entrusts to us—whether it’s a fortune or a handful of coins.

We should also be good stewards in every area of life. Unfortunately, when Catholics talk about stewardship it too often relates to raising money rather than being faithful with all the blessings God has given to us.

Pope Francis tweeted that “Seeking happiness in material things is a sure way of being unhappy.” We should not be focused on material things; our primary focus should be on God.

One of the first practical tasks the Bible study students do is to track every penny spent, which often results in surprises. It allows people to see where the money actually goes—not where they think it goes—and provides them with information so they can make better financial decisions.

Spending $5.00/day for a high priced coffee means they are spending $25/week; $100/month and $1,200/year. By tracking the daily cost, they can calculate the yearly cost. That gives them the facts to decide if they are using their money on what is most important to them. Do they want to spend $1,200 on coffee or a family vacation?

Please be assured that no one is ever asked to share any personal financial information with the others in the small group. All the discussions focus on what the Bible and other Catholic resources tell us about money and possessions.

Week three is all about Debt. The dictionary defines debt as money that a person is obligated to pay to another. Debt includes the mortgage, car loans, student loans, money owed on credit cards, bank loans, money borrowed from relatives, and past due bills. Bills that come due, such as the monthly electric bill, aren’t considered debt if they’re paid on time.

Scripture does not call debt a sin, but it does strongly discourage us from being in debt. “The rich rule over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7 RSV CE)

When we are in debt — we are a slave to the lender and the deeper we are in debt, the more like slaves we become. We have no freedom to decide where to spend our money as it is already obligated to meet our debt payments.

When we get into debt, we’re assuming that we will earn enough in the future to repay it. But can we really assume such a thing? We plan for our jobs to continue or our investments to be profitable but those things are not promised to us and the Bible strongly cautions us against such presumption: “You who say, ‘Today or tomorrow we shall go into such and such a town, spend a year there doing business, and make a profit’ — you have no idea what your life will be like tomorrow…. Instead, you should say, ‘If the Lord wills it, we shall live to do this or that.’” (James 4:13-15)

The average American household with credit card debt carries a balance of about $16,000. Credit card interest rates range from @13% to 23%, so people are paying between $2,000 and $3,600 per year in interest if they carry the average American credit card debt.

That’s money that’s being thrown away with no benefit to you. In the meantime, whatever you bought using your credit card is probably lost, used up or no longer valid by the time you pay off the credit card debt.

Many people raise their lifestyle through debt, only to discover that the burden of debt controls their lifestyle.  In a 2017 Nerd Wallet debt survey, 41% of the respondents said their debt was caused by buying spending more than they could afford on unnecessary purchases. Sirach 20:11 says it best: “A man may buy much for little, but pay for it seven times over.” That is certainly what happens when we buy on credit and have to pay interest.

The Navigating Your Finances God’s Way Bible study is a great tool to put a faith perspective on how you manage money and possessions. This study is for you, whether you are married or single, old or young, male or female, working or retired.

Listen to the Compass Catholic podcast for more on this topic.

Navigating Your Finances God’s Way

Most people don’t realize how much the Bible says about money and possessions. They may know that Jesus talks about the danger of riches or the need to care for the poor, but when they are told that the Bible has over 2500 verses dealing with money, possessions and basic stewardship principles, they are shocked.

People typically separate the financial and spiritual aspects of their lives. This separation is similar to the mercenaries who fought in the Crusades during the 12th Century. Because it was a religious war, the mercenaries had to be baptized before they went off to fight. When the mercenaries rode their horses into the water for Baptism, they held their swords high above their heads, out of the water. In effect, their swords were not baptized. They were saying that God could control their lives, but they were in full control of their swords.

Many people today hold their wallets high above their heads (out of the water so to speak) indicating that they will give their lives to God, but they remain in full control of their finances.

Yet at the very core, everything we have (including money and possessions) comes from God and it is our responsibility to care for all the blessings that God has bestowed on us, including money and possessions.

The Compass Catholic nine-week Bible study, Navigating Your Finances God’s Way helps people make the transition from “This is mine” to “It all belongs to God.”

And it does all belong to God. “To the LORD belong even the highest heavens; the earth is his also, and everything on it.” (Deuteronomy 10:14, GNT) “The world and all that is in it belong to the Lord; the earth and all who live on it are his.” (Psalm 24:1, GNT)

The Navigating Your Finances God’s Way Bible Study is nine weeks long, meeting once a week for two hours. In preparation for each weekly meeting the participants read Bible verses and do personal financial exercises.  No personal financial information is ever shared. The meetings center on discussions about the Bible verses.

The first week focuses on introductions and allowing the participants to get comfortable with each other. Prior to the first meeting, the participants read Your Money Counts, which is the discussion topic for that meeting (The eBook version of Your Money Counts is available for free from the Compass Catholic website.)

In week 2, the focus in on the difference between God’s Part and Our Part. The Bible verses for the second week help people realize that God owns everything and we can trust him to provide for our needs. We are simply his stewards.

Recognizing God’s ownership and trusting him to provide for our needs (not our wants) is one of the first steps in becoming a steward of all God’s many blessings. We are called to be faithful with what we have been given, whether it is a little or a lot, and to be faithful in every area.

When we learn and live these principles we can develop a more intimate relationship with Jesus. Having our finances in order often leads to a stronger marriage and as parents we are called to teach our children the things they need to know about living a faith filled life—which includes how to manage money and possessions.

The topic for week three is debt. The discussion centers on what is considered debt and how the cost of debt can act as a vulture to family finances. The Bible never defines debt as a sin, but being in debt is considered a curse. This week’s topics also include co-signing, credit reports and credit scores.

Honesty and Counsel are the topics for the fourth week of the study. We discuss the difference between being technically truthful without being totally honest. There is a big difference between what the church teaches about our call to honesty versus how society treats honesty.

Counsel is the second topic in week four. None of us knows everything, so when making important decisions (including financial decisions) we should seek godly counsel. Our sources of counsel are the Scriptures and Church teaching, our spouse and godly people. We must be careful when seeking counsel from someone who will have a financial gain or loss depending on our decision. We should always avoid the counsel of people who do not know God, unless we are seeking facts (not advice) from them.

In week five, the topic is generosity. We explore what the Bible, the Catechism and the United States Conference of Catholic Bishops have say about how much we have to give. The social justice aspects of giving to the poor and needy are included in this discussion.

If we truly believe that God owns everything and we are simply caretakers of what he has given to us, then it changes how we think of giving. The question to ask ourselves is not “How much of MY money do I have to give God?” The question becomes “How much of GOD’s money to I need to keep?” which is a much different perspective.

The role God plays in work is the topic for week six. Our attitude about work means viewing our work as a way to serve God and use the talents and skills he has given us. We talk about the responsibilities of both employees and employers. Other work issues are discussed, such as the benefits or negative aspects on the family when both parents are employed outside the home.

In week seven we discuss the balance between saving to care for our family and accumulating wealth simply to become rich. The purpose for savings as well as what Scripture says about saving and investing are discussed.

NOTE: (Compass Catholic Ministries provides no specific savings or investment advice—the discussion revolves around types of saving and investing vehicles and the attitude we have about savings.)

Week eight focuses on being prepared for a crisis, as so many crises have a financial impact. Why bad things happen to good people is a topic that is almost always discussed. Part of handling a crisis is learning to be content in whatever circumstance we find ourselves. The study also touches on the proper perspective for stewards. It’s not about giving away all our money or becoming rich. Stewardship is about being faithful in all ways, whether we have a little or a lot.

The final week of the study is week nine where we discuss eternity. “What profit is there for one to gain the whole world and forfeit his life?” (Mark 8:36) We are pilgrims on this earth, and our real citizenship is in heaven. This week sums up the other weeks in a call to action to be a good steward of God’s blessings.

The small group environment of the study builds deep friendships, a better understanding of how to integrate our faith into day-to-day life and a profound appreciation for financial stewardship.

The study is available in both English and Spanish and both have an imprimatur from The Most Reverend John Noonan, Bishop of Orlando. It’s for everyone, young or old adults; single or married; working or retired; financially stable or just scrimping by each month

Listen to the Compass Catholic podcast and learn more about this life changing experience.

Call us at 844-447-6263 or use the contact form on the Compass Catholic website today if you are interested in starting a Navigating Your Finances God’s Way study.

Middle Class Money Mistakes

According to a Pew Research study done in 2014, the middle class is defined as people who have an annual salary between $42,000 – $125,000. That is a huge margin between the low end and the high-end earners.

If you are on the low end of the income level, you are probably struggling to make ends meet, you have little to no savings and you can’t afford any frills.  If you are on the high end of the spectrum, you probably have a little bit of savings and can afford some of the nice things in life.

But whether you are on the low end or the high end, you may be making some mistakes that are not beneficial to your financial future. Here are some topics to consider if you want to improve your financial health.

The first thing that everyone needs to work on is ditching the debt. You want to be in a position where you are totally debt free—no credit card payments, no car loans payments and no mortgage payments.  Getting rid of the mortgage is a long-term goal but paying off the consumer debt should be priority number one.

If you were going to be charged an extra 15%-21% for everything that you buy would you still buy it?  Probably not. But people who use their credit cards and don’t pay them off at the end of the month are doing just that by paying interest. You get absolutely no benefit from carrying a balance on your credit cards and paying interest. It only provides added costs, more debt, and lots of stress when it’s time to make the payment.

The second most common mistake people make is not having an emergency fund. Personal finance experts stress the importance of having an emergency fund to cover unanticipated expenses and avoid long-term financial damage.

If you were suddenly hit with an unexpected $500 bill, would you be able to cover it? If the answer is no, you’re not alone. Nearly six in 10 Americans don’t have enough saved to cover an unplanned $500 expense, according to a report from Bankrate.com. When the unexpected expense occurs and there is not enough ready cash to cover it, the credit cards get whipped out and you go further into debt, paying even more due to interest charges.

An emergency fund is money that has been saved and reserved for emergencies. It needs to be in a liquid account (checking or savings not a retirement plan) so you can access the cash immediately when needed, with no penalty for early withdrawal. The money is never touched except for emergencies.

We encourage people to start with a minimum of $1,000. For most people, this is a goal that will take several months to achieve.  But even if you only have $400 in your emergency fund when you need it, you will avoid $400 in debt for that emergency. After you get a $1,000 saved in your emergency fund, increase it to one month’s income, then three month’s income. The goal is financial protection from all the unexpected expenses that are looming in your future.

The third mistake people make is spending without a plan.  If the money comes in and goes out and you have no idea where it went at the end of the month, how do you know that you are spending money on what is most important to you and your family?  

A lot of mistakes can be avoided if you just stop, think and evaluate how, when, where and why you are spending. Proverbs 21:5 tells us “The plans of the diligent are sure of profit, but all rash haste leads certainly to poverty.” Spending without setting priorities is certainly a way to run head first into financial chaos.

The fourth mistake is not taking advantage of an employer match on retirement savings. To avoid this mistake, invest enough in your 401(k) to maximize your employer match. Always, always save the maximum that your employer will match—it’s free money!

Along with not maximizing your employer match, the fifth mistake is delaying retirement savings until later. You may think that saving for retirement will be easier once the car is paid off, or after the kids graduate from college or when you get that long-awaited raise. But the key to a healthy retirement fund is to start early and save consistently, even if it’s a very small amount. That way you can maximize the magic of compound interest, where you’re earning interest on both what you have saved and the interest you’ve previously earned. Compounding the interest on your savings helps your savings grow exponentially over time.

The sixth mistake is spending too much on cars. A car is a depreciating asset and the newer it is, the faster it depreciates. An average car loan these days is five years or 60 months. An average payment on a car loan is $500. If you start when you are 20 and buy a new car every five years with a $500 monthly car payment, over your driving lifetime of 60 years, you will spend about $360,000 on car payments. And that calculation does not include the interest you could have earned if you had saved and invested that monthly car payment.

The seventh mistake is absorbing any extra money into your day-to-day spending. If you get even a small financial windfall or an increase in your salary it will disappear quickly if you just spend it.  Instead, allocate the additional money to emergency savings, retirement savings and to a worthy cause.

And that brings us to the eighth mistake, which is thinking you don’t have enough money to be generous. Everything we have is a blessing from God.  It is all too easy to bemoan what we DON’T have. When we think this way, it is easy to rationalize why we can’t give any money to charitable causes. Yet if we really believe that everything we have is a blessing from God, then when we are generous we are simply giving back to God what is already his. We need to look for ways to praise God and be grateful for what we DO have, and one of those ways is to be generous.

Taking time to think and plan your spending is the best way to avoid these common mistakes. It’s not glamorous and it may not be fun, but steady plodding keeps you on track. Proverbs 21:20 tells us “Precious treasure remains in the house of the wise, but the fool consumes it.”

What You Need to Know if You are Buying a Car

After a home mortgage, car loans are the largest debts most people have. More than 70 percent of all the cars on the road are financed. Car debt is one of the biggest roadblocks for people on their journey to true financial freedom.

It’s especially dangerous because most people never get out of car debt. Just when they get to the point of paying off a car, they trade it in and purchase a newer one with credit.

Unlike a home, which usually appreciates in value, the moment you drive a car off the lot it depreciates in value. It’s worth less than you paid for it by the time you hit the first intersection. If you had to sell it, you couldn’t get enough to pay off the loan.

The average price of a new car, considering all models, is about $33,000 and the typical monthly car payment is just over $500. In our Navigating Your Finances God’s Way Bible study we advise that the average expenditures for ALL transportation costs should be between 10%-15% of your net spendable income (salary, minus payroll deductions, minus giving = net spendable income).

Transportation costs include the car payment as well as insurance, gas, maintenance, tolls, parking, etc. If the total of all transportation costs should not exceed 15%, the car payment should not exceed half of that or 7% of your net spendable income, which means your net spendable income needs to be $86,000 in order to properly budget for a car payment of $500/month. And that’s only for one car. If a family is making two car payments the salary needs to be higher.

In our opinion, the most reasonable financial position is to buy a certified used car. If the average price for a new car is $33,000 and a 3 year old used car is worth only 50% of the new price, then it stands to reason a used car average price should be about $16,000.

The upside is that you’ll have lower monthly payments or maybe no payments at all. You can probably afford a better model at a lower price than if you were buying new. And those first few dents and dings won’t be as painful with a used car.

You always run the risk of buying someone else’s lemon, but that can be mitigated by buying a certified used car. These are usually 2-3 years old with low mileage. Some certified used cars may still have some of the original factory warranty left. Plus, these used cars come with certifications from factory trained mechanics covering from 150 to 180 point inspections. The cost is higher than a non-certified used car, but it is definitely lower than what you would pay for a new car. Be sure to read the fine print to understand what you are getting.

As you begin to contemplate purchasing a car, you’ll need to consider the purpose of the vehicle. If your family has outgrown the sedan, you may want to consider a minivan. If your job, or choice of recreation dictates off road capabilities, you may want to consider a truck or SUV. In addition to deciding which type of vehicle you need, you should also write up a list of car options you simply can’t live without, such as automatic transmission; power steering and brakes; good gas mileage; or adjustable seats.

It will also be helpful to write up a second list of options that would be nice to have if you happen to run into a vehicle that comes equipped with those features, but lack of those features would not be a deal breaker. Some of those features could include: bluetooth, body style, color preference, air conditioning, cruise control, and sound systems.

You also need to be aware of how much car you can afford based on your finances. Some people purchase a used car outright; others plan to finance. Either way you’ll need to determine how much you can afford to spend. In addition to the cost of the car, be sure to factor in the expenses that you may not have considered yet such as title transfer and registration fees, and in some states, smog or emissions certification.

In addition, your insurance rates may be affected with a newer car, so check with your current agent or go online to get a quote. If you plan to buy an older car, or are willing to buy a car that may need maintenance or repairs right away, set up a special fund for those probable expenses.

Once you determine how much money you can spend on purchasing a used vehicle, it is time to start the next step to car ownership which is to do some research.

We always recommend seeking counsel before making any financial decision. Proverbs 20:18 says “Plans made with advice succeed; with wise direction wage your war.”  Buying a car and haggling over the price can sometimes feel like waging war!! 

Talk to family, friends and co-workers to see which vehicles they have been happy with. Their experiences (good and bad) are purely anecdotal, but they may help you decide which make or model might work best for you.

Take a look at the general types of vehicles currently for sale, what features are available on what makes and models, and what kinds of vehicles you can afford. Spending some serious time at this stage of the process is important to making an informed decision on what type of car you’ll be narrowing your search for, so don’t skimp on the time you dedicate toward your future vehicle.

There is certainly no shortage of used cars being offered for sale by individuals, especially in larger cities and through the car selling websites and auctions online.

A major difference between buying a used car from a dealer and a private party is the degree of warranty available. Few, if any, individual sellers offer any type of after sale warranty, while dealers cars range from “as is” to limited warranties to certified vehicles that come with extended warranties.

There are many websites that provide great resources by year, make and model on such things as safety records, frequency of car repair, maintenance costs, comparison reports, and gas mileage figures. Here are some of the best places to get car info on the Web: Edmunds.com; Cars.com; U.S. News Best Cars; Kelley Blue Book, and TrueCar.

When you find a car you are interested in, be sure to request that the seller provide you with the Vehicle Registration Number (VIN) for that car. Each car manufactured is issued its unique VIN and the records of that vehicle follow it throughout its lifetime. For a minimal fee, online services can locate the records for that particular car and send its vehicle history report to you, including: if the car has a clear title; if the car has been salvaged; if the car has been involved in a serious accident; how many times the car has been sold; the original sale date; and if there have been any recalls for that car. Investing in a VIN search can save you a lot of headaches (and money) down the road.

When you are car shopping, spend some time considering your options, discuss the idea with your family and friends, do some window shopping and PRAY for God to help you make a wise decision.

Lots of people get confused between the function of a car, which is to take you from Point A to Point B and the status of driving a new car. In 1 John 2:15, we read “Do not love the world, nor the things in the world.” So make a car buying decision based on your need for safe reliable transportation and nothing else.

Navigating Your Finances God’s Way

Most people don’t realize how much the Bible says about money and possessions. They may know that Jesus talks about the danger of riches or the need to care for the poor, but when they are told that the Bible has over 2500 verses dealing with money, possessions and basic stewardship principles, they are shocked.

People typically separate the financial and spiritual aspects of their lives. This separation is similar to the mercenaries who fought in the Crusades during the 12th Century. Because it was a religious war, the mercenaries had to be baptized before they went off to fight. When the mercenaries rode their horses into the water for Baptism, they held their swords high above their heads, out of the water. In effect, their swords were not baptized. They were saying that God could control their lives, but they were in full control of their swords.

Many people today hold their wallets high above their heads (out of the water so to speak) indicating that they will give their lives to God, but they remain in full control of their finances.

Yet at the very core, everything we have (including money and possessions) comes from God and it is our responsibility to care for all the blessings that God has bestowed on us, including money and possessions.

The Compass Catholic nine-week Bible study, Navigating Your Finances God’s Way helps people make the transition from “This is mine” to “It all belongs to God.”

And it does all belong to God. “To the LORD belong even the highest heavens; the earth is his also, and everything on it.” (Deuteronomy 10:14, GNT) “The world and all that is in it belong to the Lord; the earth and all who live on it are his.” (Psalm 24:1, GNT)

The Navigating Your Finances God’s Way Bible Study is nine weeks long, meeting once a week for two hours. In preparation for each weekly meeting the participants read Bible verses and do personal financial exercises.  No personal financial information is ever shared. The meetings center on discussions about the Bible verses.

The first week focuses on introductions and allowing the participants to get comfortable with each other. Prior to the first meeting, the participants read Your Money Counts, which is the discussion topic for that meeting (The eBook version of Your Money Counts is available for free from the Compass Catholic website.)

In week 2, the focus in on the difference between God’s Part and Our Part. The Bible verses for the second week help people realize that God owns everything and we can trust him to provide for our needs. We are simply his stewards.

Recognizing God’s ownership and trusting him to provide for our needs (not our wants) is one of the first steps in becoming a steward of all God’s many blessings. We are called to be faithful with what we have been given, whether it is a little or a lot and to be faithful in every area.

When we learn and live these principles we can develop a more intimate relationship with Jesus. Having our finances in order often leads to a stronger marriage and as parents we are called to teach our children the things they need to know about living a faith filled life—which includes how to manage money and possessions.

The topic for week three is debt. The discussion centers on what is considered debt and how the cost of debt can act as a vulture to family finances. The Bible never defines debt as a sin, but being in debt is considered a curse. This week’s topics also include co-signing, credit reports and credit scores.

Honesty and Counsel are the topics for the fourth week of the study. We discuss the difference between being technically truthful without being totally honest. There is a big difference between what the church teaches about our call to honesty versus how society treats honesty.

Counsel is the second topic in week four. None of us knows everything, so when making important decisions (even financial decisions) we should seek godly counsel. Our sources of counsel should be the Scriptures and Church teaching, our spouse and godly people. We must be careful when seeking counsel from someone who will have a financial gain or loss depending on our decision. We should always avoid the counsel of people who do not know God, unless we are seeking facts (not advice) from them.

In week five, the topic is generosity. We explore what the Bible, the Catechism and the United States Conference of Catholic Bishops have say about how much we have to give. The social justice aspects of giving to the poor and needy are included in this discussion.

If we truly believe that God owns everything and we are simply caretakers of what he has given to us, then it changes how we think of giving. The question to ask ourselves is not “How much of MY money do I have to give God?” The question becomes “How much of GOD’s money to I need to keep?” which is a much different perspective.

The role God plays in work is the topic for week six. Our attitude about work means viewing our work as a way to serve God and use the talents and skills he has given us. We talk about the responsibilities of both employees and employers. Other work issues are discussed, such as the benefits or negative aspects on the family when both parents are employed outside the home.

In week seven we discuss the balance between saving to care for our family and accumulating wealth simply to become rich. The purpose for savings as well as what Scripture says about saving and investing are discussed.

NOTE: (Compass Catholic Ministries provides no specific savings or investment advice—the discussion revolves around types of saving and investing vehicles and the attitude we have about savings.)

Week eight focuses on being prepared for a crisis, as so many crises have a financial impact. Why bad things happen to good people is a topic that is almost always discussed. Part of handling a crisis is learning to be content in whatever circumstance we find ourselves. The study also touches on the proper perspective for stewards. It’s not about giving away all our money or becoming rich. Stewardship is about being faithful in all ways, whether we have a little or a lot.

The final week of the study is week nine where we discuss eternity. “What profit is there for one to gain the whole world and forfeit his life?” (Mark 8:36) We are pilgrims on this earth, and our real citizenship is in heaven. This week sums up the other weeks in a call to action to be a good steward of God’s blessings.

The small group environment of the study builds deep friendships, a better understanding of how to integrate our faith into day-to-day life and a profound appreciation for financial stewardship.

The study is available in both English and Spanish and both have an imprimatur from The Most Reverend John Noonan, Bishop of Orlando. It’s for everyone, young or old adults; single or married; working or retired; financially stable or just scrimping by each month

Listen to the Compass Catholic podcast on Breadbox Media and learn more about this life changing experience.

Call us at 844-447-6263 or use the contact form on the Compass Catholic website today to get help in starting a Navigating Your Finances God’s Way study.

God Marriage & Money

While talking about money may not be considered a romantic thing to do when you are engaged to be married, not talking about money may lead to divorce, which is definitely not romantic! Joint discussions about the family finances need to happen early and often in order to build and maintain a strong healthy marriage.

Think about how much of your time is occupied by money in your day to day routine.  Every minute is somehow connected to money. You are either earning it, spending it, managing it, or using something on which you spent money. There aren’t very many activities that do not somehow relate to finances. 

When a couple gets married they each bring assumptions and preconceived notions about money into their marriage. He thinks $1,000 in debt is horrible. She thinks $10,000 in debt is normal. He wants to lease a car and get a new one every 2 years.  She assumes they’ll buy a good used car and drive it till the wheels fall off. He thinks they will only use cash and buy what they can afford. She thinks they can use credit cards and buy whatever they want. He wants to fly by the seat of his pants financially. She thinks they need a formal budget.

All of these assumptions, and many more, will come up at some point in a marriage. Maybe right after the honeymoon or ten years down the road, but financial assumptions will come up someday. And unresolved financial differences will cause problems sooner or later.

Communication about anything makes that topic a shared concern between the spouses, and money falls into this category.  Without planning and a sense of direction, discussions about money can lead to arguments and finger pointing–definitely not a good communication method!

This means finances need to be discussed in an honest and open way without playing the blame game. One of the reasons we encourage couples to develop a spending plan is to take away the emotion and help them focus on facts. Instead of saying “you always overspend,” the conversation can be much more non-threatening, such as “Our entertainment budget is over the limit let’s talk about what happened.”

Having a spending plan helps you and your fiancé focus on the overall vision and plan for your money and once you do that, the small day to day discussions take care of themselves. It’s about making a plan, and sticking to it together.

Information gives you power over your finances. Not talking about money, 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.

We encourage couples to have a clearly defined money management system all the way from who handles the mail to who pays the bills and who balances the bank and credit card accounts. Without a well thought-out operational plan, things fall through the cracks

Open communication with no blame and shame is required through regular money dates. The day to day spending should be reviewed weekly. The budget needs to be reviewed monthly (or more often if you are just starting out.) Long term financial goals such as buying a house, saving for retirement, replacing a vehicle or a large scale home improvement projects should be reviewed every 3-12 months.

A sure way to derail your financial plans is to involve your parents in your finances, either by asking for loans or because mom and dad keep funding your lifestyle.

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 in order to become financially and emotionally independent from them.

It is dangerous to a marriage if the couple is financially dependent on mom and dad, because that dependency gives mom and dad every right to judge how, when, where and on what you spend money. A young married couple needs to learn how to work together as a team without the involvement of wither set of parents.

There is a definite correlation between couples’ happiness, and having their financial goals aligned. Many financial experts promote the use of separate fund–yours, mine and ours–but that can be dangerous to a marriage as it builds walls between the spouses. And in order to have financial goals aligned, the money must be considered ‘ours’ or there will be arguments and accusations. Find ways for you both to be equally engaged in all money decisions.

The money in a marriage and all the responsibilities that come with money need to be shared by both spouses–no matter which one works or who makes more money.

So, whether you like or not, how you communicate about money and how you handle money as a couple has a huge impact on your marriage

The God Marriage & Money book from Compass Catholic Ministries will help you discuss these and many more topics related to finances in marriage. The book provides detailed topics for you to share, such as how much debt and savings you have; your credit reports and credit scores; and your attitude about giving, spending and saving. Start your marriage off on the right foot and have the “money talk” now!

Finding a Financial Planner (part 2)

Last week’s blog was about the background work you need to do when you are looking for a financial planner. This week’s blog is about interviewing a potential financial planner. As a reminder, be sure to interview at least 3 people before determining which financial planner is right for you.

The first thing you want to discover relates to their practice in general terms, such as their investment and client philosophy and previous work experience. Most financial planners have a typical type of client and financial situation they like to work with, so it is important for you to understand how their preferences relate to you. You want to be sure the services they offer to match your needs.

After you learn the basics, find out more about their qualifications. Anyone can call themselves a financial planner, so be sure and ask if they are recognized as a certified financial planner. A CFP designation means they have passed a rigorous test administered by the Certified Financial Planner Board of Standards. The CFP designation also means they must commit to continuing education on financial matters and ethics to maintain their designation. The CFP credential is a good sign that a prospective planner will give sound financial advice.

Ask for the code of ethics they follow. Certified Financial Planners are held to the CFP Board’s Code of Ethics, which requires them to act as a “fiduciary.” In short, this means the planner has pledged to act in a client’s best interests at all times. This point is critical and should be a deal breaker if a prospective planner is not a fiduciary.

If an investment professional is not a fiduciary anything they sell you merely has to be suitable for you, not necessarily ideal or in your best interest. The difference between ‘best interest’ and ‘suitable’ is an important fine line for you to consider.

Request a copy of the ADV form which is used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. These forms are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at http://www.adviserinfo.sec.gov/.

There are two parts to the form. Part 1 requires information about the business, such as ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees.

Part 2 contains information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel.

After you have checked out their credentials, the next important fact to understand is how they get paid. Financial advisors deserve to get paid for managing your money and since you are paying the bill, you need to understand how it works.

There are several pay structures they may use. They may be paid based on commission for certain products. In this case, they could have an incentive for steering you to certain financial products in order to maximize their commission, which may not be in your best interest. They may not be the most unbiased source of advice if they profit from steering you into particular products.

The second method of payment is a flat rate. You might pay them a flat fee, such as $1,500, for a financial plan or their fees may be calculated on an hourly basis. If you’re young and don’t have a lot of assets, a planner who charges by the hour could be most appropriate as they are usually the best fit when your needs are fairly simple.

The third way financial planners make money is being paid a percentage of your portfolio. This fee may be calculated quarterly or annually. It is often 1-1.5% of all the assets—investment, retirement, college-savings and other accounts—they’re minding for you. This method means the more your money earns for you, the more it earns for them so they have an incentive to keep your portfolio growing.
When talking about fees, you also need to find out how you pay for their services. Are the fees deducted from your account? Are you expected to pay by check? How often?

As you learn more about their practice and qualifications, ask about the types of investments they would recommend to someone in your circumstances. This is a good way to match the list you made earlier (see part 1 of this blog) to what they actually recommend.
If they start bragging about beating market averages, run away – no one can do that on a regular basis. And anyone who’s trying to beat the market may be taking risks that you don’t want to take. Always be wary when you’re being pitched an investment by someone who stands to earn money from that investment. Where is that profit coming from? That’s why it is important to understand how financial professionals are compensated.

Ask how much contact they normally have with their clients. Some planners hold an initial planning meeting and then only meet with clients once a year. Others might have quarterly meetings.

Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses. Nor can they give investment advice unless registered with state or federal authorities, so be sure to clarify who your main contact will be. It doesn’t give you much confidence if you interview one person and decide you’d like to work with them only to have another person handle your accounts.

You may want to ask for a sample financial plan. Financial plans will vary based on the planner and the company. You may get overwhelmed with 40 pages of facts and figures or you may think that amount of detail is not enough. Be sure that what they provide will meet your needs.
As the meeting ends there’s one last question you want to ask yourself: Did they seem interested in you or did they do 90% of the talking? If they asked about you, your life and your goals that’s a good sign. If they bragged about their qualifications and expertise, and how much money they can make for you, they may be more interested in getting your business than in helping you reach your goals.

When in doubt, do more homework and make sure that the person you choose to work with is right for you from a lot of different perspectives and angles. Don’t let someone con you into working with them just because they promised to make you rich. Nobody can make that promise and keep it.

While choosing the right financial planner is important, ultimate peace of mind comes from the confidence that all money is God’s money, and that God alone is our true provider and protector.

What’s the One Thing in Your Box?

I am in the middle of an interesting books right now titled Half Time, authored by Bob Buford. It talks about that time in each of our lives when we step back and decide to keep going in the same direction we have been headed or we decide to make a change.

It’s that moment when we look into the mirror and stare into our own eyes and ask “Is this all there is?” It’s a conscious decision to move from seeking success to finding significance. It happens in different ways, and at different points in life for each of us, whether we are 35, 55 or 75; whether we are high powered executives, desk jockeys or mechanics.

One of the most interesting things I read in the book is a challenge Mr. Buford was presented with when he was making the decision to move from the business world into ministry. He was counseled to figure out what was in his box.

The premise is that you have an empty box in front of you. You need to fill the box with the ONE thing that is most important in your life. What motivates you more than anything else? What gives your life meaning? What is your driving force?

Putting ONE thing in the box means a lot of stuff gets left out of the box.

Our boxes are often filled with a lot of stuff we love, which is relatively unimportant in the larger scheme. Thinking about the box and the one thing is very counter-cultural. Our whole world surrounds us with the idea that the more we have, and the more we get, and the busier we are, the happier we’ll be. Our world would have us cram the box full of what the world considers important (money, possessions, power, significance).

For any Christian we would certainly hope that our motivating force is God and that is what we would put in our box.

But our box may be so full of everything else that God is squeezed in to a corner among all the minutia that fills our box, or he is left out of the box entirely.

But if you have God in you box as the only thing that really matters, do you really need anything else?

In John Chapter 17 we hear the prayer of Jesus. He is acting as an intercessor and praying to the Father regarding the disciples that he is leaving behind as well as the disciples that will follow him in the future. He is asking for unity between the Father and the disciples, just as Jesus and God the Father were in unity.

This chapter of John’s gospel echoes the phrase “Be in the world but not of the world.” Being in the world means we are to be salt, light and leaven to those who need to hear the message of salvation. Not being of the world means we have the proper perspective between what is all around us and what is really important. Being in the world means we can use material things to fulfill God’s mission for us but not let those material items take on more importance that they deserve. Being in the world but not of it, helps us realize that the things of this world have no long term significance.

Material goods are only valuable if they help us serve the purpose God has for us. That doesn’t mean we have to drop out of the world, but rather that we must put worldly things in their proper perspective. We are able to separate the material goods we have from our sense of self worth.

We must never become too much at home in this world, or we will become ineffective in serving the God who made us. Peter wrote, “I urge you as strangers and sojourners to keep away from worldly desires that wage war against the soul.” (1 Peter 2:11)

We are part of the Pilgrim Church on earth. Pilgrims are unattached. They are aware that that excessive accumulation of things can be a distraction. Material things are valuable to pilgrims, but only as they facilitate their mission. Things can entrench us in the present world, acting as chains around our legs that keep us from moving in response to God. When our eyes are too focused on the visible, they will be drawn away from the invisible.

For Lent, I encourage you to figure out what’s in your box. Are there so many items in your box that you are distracted? Does the box contain the one thing that facilitates your journey to God? Is the item in your box helping or distracting you from the destination of your pilgrim journey?

Find an empty box. At the end of each day write down a summary of your day. Where did you spend your time? Where did you spend your money? What did you think about the most? Where did you use your talents? What was your focus during the day?

Do that for one week. The following week, take one piece of paper out of the box each day and cross off those items which are not helping you on your pilgrimage. Do this for several weeks and you will slowly change your habits so that there is only one thing in your box. And that will be what is most important to you.