The Christmas Bills Have Arrived – Now What?

“Black Friday” was in November of last year, but for many consumers, “Black January” occurs when the Christmas bills start piling up in January.

For many people, this might be the worst time of the financial year. Most people don’t budget for Christmas spending, but they spend a lot of money anyway! And if there is no money in your budget to cover Christmas spending, those credit cards get used.

If you are the typical American, instead of creating a financial plan in January to save for Christmas, you didn’t create any special savings to cover the cost of Christmas spending–gifts, travel, decorations, extra food, and drinks.

Now it’s time to figure out how to pay for all those presents and Christmas parties. Statistics show that the average family will be paying for Christmas 2017 all the way until October 2018.

If you are facing a ton of debt from Christmas spending, it’s time to go into crisis mode. All available cash should be funneled towards paying off the Christmas debt on your credit cards.

The best thing to do is to put your credit cards in your drawer and not use them again until your Christmas debt is paid in full, otherwise you are digging a debt hole you may be able to escape. Scour each and every spending category for ways to cut back. If you are saving for something special such as a vacation, put it on hold until those Christmas bills have been paid in full.

Calculate the total of your Christmas purchases on each of your credit cards. This will tell you how much you spent on Christmas for each card. On every card where there is Christmas spending, make the minimum payment plus as much extra as you can scrape up to pay against your Christmas purchases Do this for every card that you used for Christmas spending

If you have cards that you didn’t use for Christmas spending, but they still have balances—pay only the minimum payment until your Christmas debt is paid in full.

Christmas happens every year on December 25th, so why does it catch people unprepared financially every year?

There is a great verse from Luke 14:28-30 that goes like this: “Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion? Otherwise, after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, ‘This one began to build but did not have the resources to finish.’”

So we want you to plan ahead for the resources you need for Christmas. As soon as you have the debt from Christmas 2017 paid in full, figure out how many months are left until Christmas 2018. Then divide the amount you spend on Christmas by the number of months remaining.

When you begin to purchase presents for Christmas 2018, spend only as much as you have saved! If you were only able to save $500. That’s all you can spend. It may be a lean Christmas, but it will certainly help you get ahead financially.

Once you have paid for Christmas past and begun saving for Christmas future, in 2019, you can save each month to pay for Christmas and avoid the huge credit card bills in January.  

After you get a handle on Christmas debt, you can tackle the rest of your credit card debt. Begin by taking the money you were using to pay down the Christmas debt and apply it to the smallest credit card balance. Once that is paid off, tackle the next smallest balance.

This process will help you pay off old debt and avoid new debt.

Even ants know how to plan ahead. Listen to this verse from Proverbs 6:6-8: “Go to the ant, O sluggard, study her ways and learn wisdom; For though she has no chief, no commander or ruler, She procures her food in the summer, stores up her provisions in the harvest.”

If ants are smart enough to save ahead, aren’t we?

You may think you deserve to spend a lot of money on Christmas, or you may think that you need to buy everyone you know a nice present, but it’s more important to live within your means.

You can do it if you put your mind to it!

Do you have any creative ideas for Christmas savings?

Money Saving Ideas

One of the things people often do not appreciate about saving is how fast the savings grow when you save small amount for a long time on a regular basis. Don’t wait till some arbitrary time in the future when you feel like you have enough money to save. It’s important to start now, even if it’s just a small amount, because small regular amounts really add up.

If you want to save $1,000 this year, you need to save $2.74 each day. In 40 years, at 10% interest, you’ll have over $486,000.  If you delay saving $2.74 a day for just one year, you’ll have $45,000 less in 40 years.

Groceries may be one of the areas most ripe for savings. Wandering around a grocery store (especially if you are hungry) often leads to overspending. Plan your meal(s) before you shop and stick with your list. That should mean you won’t have to run back to the grocery store multiple times during the week.

Watch for Bogos and plan your menus around what is least expensive that week. Most grocery stores run specials on a regular rotation. If you know when chicken or pork is on sale, you can plan your meals around those sales.

Unless you know there is an issue with your local water supply, drink tap water, and don’t buy bottled water.  You’ll save money and help the environment. If you look closely at the bottled water label, you’ll find that most of it comes from a public supply, so in reality, you are simply buying tap water from a different location.

Analyze your transportation options to save some cash. If your destination is nearby, walk or jump on your bike to get there instead of wasting expensive gas. Or consider carpooling or taking public transportation.

Google “Comparison shop” and there are lots of websites which you can use to compare prices from different sources on the same product. When you type in what you’re looking for, you’ll get a list of prices and stores that carry your item so you can easily find the best deal. You have to be careful and be familiar with the product to compare size and packaging because it can be confusing!

Put aside all the items you don’t use and give them to charity. Make sure to document everything you gave away and always get a receipt form the charity to attach to your donation list. Google “How much is my stuff worth” and determine the value of the items you gave away for a deduction on your tax return next year.

Analyze the benefits of refinancing your home loan. You may be shelling out extra dollars for your monthly home loan payment. Call your trusted mortgage broker to find out if you can reduce your mortgage rate and payment by refinancing. Be careful that the cost of refinancing doesn’t eat up any potential savings.

Another way to save on your housing costs is to keep track of how much equity you have. When you reach 20% equity you may be able to discontinue the PMI (private mortgage insurance).

When you use a credit card, be sure the money is in your budget for the item you purchased. Then pay the bill in full at the end of each billing cycle. Do some research and find out if you can earn points with your credit card. Then, use those points to buy things you’d have to buy anyway, like gifts for teachers, new electronics or school shopping.

Do it yourself is always a good way to save. Homemade gifts are the most thoughtful gifts you can give. Use sentimental items like pictures and souvenirs to put together a memorable present for a friend or family member.

With all the home improvement shows out there, the “I don’t know how” excuse no longer works. Google it, look it up on DIY or HGTV, or ask the folks at the hardware or home improvement store, and get to work. Tackle ONLY the jobs you know you can handle. Otherwise, you may increase your costs if you botch it up and have to hire a professional to fix your mistakes

Change your buying habits to buy out of season. Buy Christmas decorations and cards in January. Buy air conditioners in December. Buy winter clothes in January. August is the best time to buy beachwear. Off season buys save money.

You know what they say, one man’s trash is another man’s treasure. Take advantage of gently used items. Get a bunch of friends together, have everyone bring clothes, toys or household goods that they’re not interested in, and go to town! Whether it’s clothing, books or electronics, buying used and refurbished items can save you a pretty penny off the sticker price. Used items are especially good for children who grow so fast they often can’t make it through a whole season wearing the same size. At the same time, you may be able to earn some money by selling your gently used items to a consignment store.

Stay home with friends and family. Going out to eat and for entertainment with friends almost always costs more than staying in. Resist the urge to splurge and instead, invite friends over for a potluck, board games or a movie.

Another takeoff on sharing is vacations. If you have family or friends in an area where you want to vacation, you may be able to stay with them for a few nights—as long as you don’t wear out your welcome. Or share a vacation rental. If your extended family likes to take a week’s vacation at the beach each year, think about splitting the cost of a home large enough for everyone.

Even going to the least expensive fast food restaurant means spending $5 for lunch every day. You could easily spend $1,300 a year just on lunches, so pack your lunch instead. You’ll save money, the food will likely be more nutritious and you’ll put your leftovers to good use.

A great way to involve kids in the saving process is to pick a fun family item that you all want—maybe a new TV, an Xbox or a trip to the amusement park—and have the family work together to save what’s needed to make it happen. Create one of those thermometers to track the total amount saved each week against your goal and have it be a family affair. You can save spare change. Or have the kids contribute a percentage of what they earn. Have the kids cut coupons for your weekly shopping trip, and add the money saved to the family fun fund. It’s a good lesson in saving for what you want and working together as a team.

If you are careful with your spending, and creative in your ideas and prayerful with your intentions to manage your money wisely. You can grow your savings, get out of debt and prepare for the future.

No matter how much you have saved, keep in mind the following verse from 1 Timothy 6:17: “Tell the rich in the present age not to be proud and not to rely on so uncertain a thing as wealth but rather on God, who richly provides us with all things for our enjoyment.”

What Does Your 2018 Financial Plan Look Like?

It’s a new year and we hope that you have reviewed your 2017 Financial Plan and updated to be your 2018 plan. If don’t have a financial plan in place for 2018, now is the time to get on track.

Just so you know, creating a plan is definitely Scriptural! “Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion?”  Luke 14:28. Planning is a good way to be sure you are following God’s principles in managing your finances. Having a plan and managing your wealth and possessions is all about being good Stewards!

If this is the first time that you are doing a financial plan, you may have many questions about how to create the plan and what to include. The first place to start is to figure out where you are and where you want to go. Without those two pieces of information having a plan is meaningless.

Have you ever used a GPS to find your directions to a certain location? The starting point is your current location and your endpoint is where you want to go. Creating your financial plan should be done in just the same way.

If you don’t know where you are, how do you know your starting point? And without having a defined endpoint, you can go anywhere, even in circles, and you will have accomplished your goal.

On the CompassCatholic website, there is a Money Map which shows you the steps you need to take to reach true financial freedom. It covers what you have to do in the short term, mid-term and long-term to become financially free.

Start by reviewing the Money Map and check off the items you have completed, then focus on finishing the first steps that are incomplete.

Once you know what you have to complete, review where your money went in 2017. If you’re using a budgeting app or electronic spreadsheet to track your spending, this should be easy. Review the budget amount and actual amount spent in each category to see how you did for the year.

Did you spend more money than you budgeted in any categories? What about your categories that were underspent? Analyzing each category from an annual perspective will give you great insight into any trouble areas in your spending and a year of spending is the only valid basis for establishing your budget for the new year.

Once you have thoroughly reviewed last year’s budget and financial plan you are ready to begin setting your plan for the new year.

If you don’t have any data from the previous year, now is the time to start. Begin by tracking every penny that you spend–every penny–cash, credit cards, debit cards, and bank drafts so you’ll know where your money is going. And you also need to track every penny that is coming in–your salary, bonus, gifts, income tax refund, social security, childcare payments, part-time work, inheritance, deferred compensation, worker’s compensation, etc.  

As you collect the data, put your expenses into categories: housing; transportation; groceries; medical; clothing; medical, etc. You now have the first stages of a budget for this year! Matching the income to the outgo allows you to see the difference between the two and discover if you are spending money wisely or if there are areas that need to change.

Getting a real look at the income and outgo helps you develop answers to all the financial questions you should be asking yourself:

  • How much liquid money do you need each pay period for daily use?
  • Where are you overspending?
  • Are you spending on what is most important to you?
  • What are your short-term savings goals (1-5 years)
  • What are your mid to long-term savings goals (5+ years-retirement)
  • What life goals do you have (education, starting a business, retirement, moving to a different location).
  • How much money will you need when you retire and are you on track to save it?
  • Do you anticipate that your current monthly expenses will increase or decrease this year?

You may not know each answer exactly, but write something down so that you can go back and refine it as the year progresses. Your answers today may be different than the answers you’ll have in 6 months! But at least now you have a starting point.

The most basic way to monitor your current financial health is to calculate your net worth. To do that, list what you own (house, car, furniture, electronics, clothing, boat, etc.) then define the current value of that item if you had to sell it today and add the current values together to get a total of your assets.

Next list your debts. What do you own on your credit cards, mortgage, second mortgage, car loans, student loans, money your parents loaned to you, etc.? Add the total of all your debts and subtract debts from assets to determine your net worth. You want your net worth to be positive—not negative!

This isn’t something that you want to do every month, but checking it every six months would be a good thing. Hopefully, you will see your assets grow and your debts decrease, meaning that your Net Worth will be increasing!

For the first 10-15 years we were married we didn’t really have a financial plan, we were just flying by the seat of our financial pants. Once we learned God’s way of handling money everything changed. We understood that we are called to be good stewards of God’s blessings and it was up to us to manage what God had given to us in a way that honored him.

We received many blessings from having a financial plan based on God’s word. We have already reviewed our 2017 plan and updated it for 2018. Our current 2018 plan is still based on the original plan we defined 25 years ago which has been updated each year to reflect life changes.

One key to a successful financial plan is a way to reduce or completely eliminate your debt. The average American has $10,000 –  $15,000 of credit card debt; over $30,000 in automobile debt and over $130,000 in mortgage debt. All those debt payments add up to a lot of interest paid to the lenders. The faster you can reduce and eliminate your debt, the better your financial future will look!

If you are married, both spouses need to be involved in developing the yearly financial plan. Both of you will benefit from good planning and suffer the consequences of a bad or nonexistent plan. Money can be one of the leading causes of divorce so don’t let that happen to you.

We have provided you with some ideas that will assist you in developing a sound financial plan so you can obtain True Financial Freedom in the years to come. Having a plan is definitely Scriptural, and if you create your plan keeping the Scriptures as the basis for each step you take, you will ultimately achieve success.

The Lord tells us in Psalm 32:8, “I will teach you the way you should go; I will instruct you and advise you.”

Call us at 844-447-6263 or use the contact form on the Compass Catholic website for more information.

Dreaming and Doing are Two Different Things

The keys to personal financial success are very simple. Keep track of your money. Spend less than you earn. Have an emergency fund. Find ways to economize. Save and invest on a regular basis.

Every other life change you may want to make is also very simple.  Want to lose weight? Eat fewer calories than you burn. Want to get more organized? Clean up your junk. Want to get that college degree? Go back to school. Want a deeper faith life? Pray and receive the sacraments on a regular basis.

Planning what you want to do is the simple part. Having the discipline to act on that plan is a lot harder. Just because something is simple does not mean it is easy to achieve. This could be said about losing weight, finishing college, getting organized, deepening your faith life or getting your finances in order.

So how exactly do you make a change in your life that seems really simple but is genuinely hard to accomplish?

The best way to start is to do one thing each day that moves you one step closer to your goal. If you are trying to get control of your finances, start tracking every penny you spend each day so you have an understanding of exactly where your money goes and what needs to change. If you don’t have any idea of where your money is going, how can you hope to define any changes you need to make?

It’s fun to dream about being debt free, but that won’t happen for a long time. It’s also fun to dream about a time when you will have your retirement funded. It won’t happen this week or this month or this year.  But if you don’t start with a small step today it won’t happen at all. Success is the sum of small efforts repeated day in and day out, month after month and year after year.

The only way you’re going to make any long term progress is to begin by making short term progress. What can you do today to move in a positive financial direction? If you succeed today you have taken one small step in the right direction. If you add today to all the todays that follow, one small step at a time, you will get to your destination.

Track your spending for 60 days and put it into categories. How much did you spend today on giving, housing, food, transportation, clothes, entertainment, etc.? Review it weekly, and monthly.

Once you have tracked your spending for 2 months, step back and look at the total of 60 days’ worth of spending. The 60 days of spending provides you with a baseline start for a monthly budget. (Or you can call it a spending plan since nobody likes the word budget.)  

Reviewing your budget on a monthly basis allows you to see how much progress you are making on controlling and allocating your money to the most important things. Is it more important to save for the kid’s college education or to buy a fancy coffee on the way to work every day? Success begets success and controlling the monthly income and outgo helps you focus on more strategic money goals.

Review your spending on a monthly basis and analyze your progress. Is your debt lower this month than last month? Do you have more money in your emergency fund this month than last month? Is your giving more generous this month than last month? Have you over spent in any categories? What can you do to be more successful in the next month?

Once you get your day-to-day spending under control every month, you can tackle bigger picture items like paying off all your consumer debt, paying off the mortgage, and saving for college and retirement.

One things that helps when you are trying to get your finances in order is to hang out with people who have the same goals you do. If you are trying to cut your spending, hang out with your friends who are naturally frugal and not the people who spend money like it’s water trickling through their fingers.

Surrounding yourself with people who want to achieve or who have achieved the same goals you have means you have a natural support system. Their actions will help bolster your actions. Over time, their spending and saving habits will seem more and more natural to you.

It is also important to celebrate your success. You can download a free eBook copy of Your Money Counts, and when you read it you’ll see that we are big believers in celebrating success. In a small way. When you pay off that first credit card, celebrate.  For your very next dinner do something special—like lighting candles on your dinner table and thinking about how much money you are saving by eating at home!

When you accomplish your next financial goal—like paying off that 2nd credit card— celebrate again.  Maybe you can have a sundae at the ice cream store. Once you get all of your credit cards paid off then you can go out to eat at any nice restaurant where you can each order a meal for less than $20!

Celebrating your short term successes and achievement of milestones is a fantastic way to feel great about how things are going, but that celebration should not undo the progress you’ve made. If you’re trying to improve your financial status, don’t celebrate your success by overspending.

Simple doesn’t mean easy. Creating a plan to fix your finances is simple. However, executing the plan is hard. The choices you have to make are hard and they go against the influence of our materialistic society.

Of course, the easy road is usually the one that puts you in a place where you don’t want to be. Perhaps it’s time to try the harder road … the road that Jesus outlined over 2000 years ago … you may just find that the harder road isn’t quite as hard as you thought.

1 John 2:17 we read, “Yet the world and its enticement are passing away. But whoever does the will of God remains forever.” Don’t fall victim to the enticements of this world.

Listen to the Compass Catholic podcast for more about how to stop dreaming and start doing.

Are You Being Honest With Yourself?

 

Fifty or sixty years ago, if you had asked someone if they were honest or truthful, they would have looked at you as if you had two heads. At that time, there was no discernable difference between the two.

Our attitudes have changed so much that today people often manipulate their words and actions so they are scrupulously truthful without being absolutely honest.

Society’s acceptance of relative honesty is the opposite of what we learn in Scripture. The Lord requires absolute honesty from all of us at all times in every aspect of our life.

Sooner or later we all have to face the dishonesty within ourselves. And that dishonesty is especially harmful if it is related to our current financial situation.

Let’s dig into those areas where you may be lying to yourself.

Needs are the basics in life—food clothing and shelter. Wants are anything above and beyond basic needs. Things like the newest cell phone, the bigger house, restaurant meals or the latest fashions are all wants. It is really easy to convince yourself that you NEED something when in reality, you really just WANT it.

Don’t confuse yourself by calling the things you WANT a NEED. Because once you start confusing needs and wants it is easy to talk yourself into buying anything that catches your eye. It is not necessarily bad to fulfill your wants. In fact, as humans, we are wired to have goals and dreams, but be totally honest about which is which.

We are also being dishonest with 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. Setting yourself up to be happy based on buying things puts you in a never-ending cycle of “what’s next?” It’s hard to be happy if you never stop and appreciate what God has already given you.

In 1 Timothy 6:8, we read: “If we have food and clothing, we shall be content.”  It is much harder to be content if you have food, clothing, and shelter, plus a long list of unfulfilled “needs” and a never-ending inventory of things to buy which will finally bring you happiness. If you aren’t happy with what you have, you will never be happy when you get what you want.

Another way we may be lying to ourselves is when we justify being in debt because “everybody has debt.” There’s the school loan, the car loan, the mortgage, the second mortgage and all the credit card debt.  If you are using debt to subsidize a lifestyle you can’t afford, you are just being dishonest with yourself.

In order to gain control and spend less than you make, it’s crucial to live within your means. Try writing down everything you spend money on for a few months and organize your spending into categories. (Here is a helpful spreadsheet.) Once you have a few months of spending in a format you can review, it will help you develop a spending plan so you can manage what’s coming in vs what is going out.

If we convince ourselves that we don’t make enough money to save anything it’s another big lie. You may not be able to save a significant amount of money but if you are not saving anything, sooner or later you will be forced to use debt when there a health issue, an accident, an appliance that needs to be replaced or a major repair to the car. Those unexpected expenses hit everyone sooner or later. And if you haven’t saved any money, the only option is the credit cards or a loan.

We can again lie to ourselves by delaying retirement savings because there will be time for that later. The best way to build a retirement savings account is to start early and save on a regular basis. In Proverbs 21:5 we are encouraged to save on a regular basis “Steady plodding brings prosperity…” Every American should be saving for retirement in some way. if your employer offers a 401k match, take advantage of it. A 401k match is a free money from your employer to reward you for something you should be doing anyway.

Getting hoodwinked into investing in something because the returns on your investment are too good to be true means you are believing someone else’s lie. When these “can’t miss” investment opportunities are presented to you, keep your greed in check. Taking big risks out of desperation for a quick gain usually results in losing your original investment. In 1 Timothy 6:9, we read “Those who want to get rich fall into temptation and are caught in the trap of many foolish and harmful desires which pull them down to ruin and destruction.”

And considering that everything we have is a gift from God, our biggest lie is thinking that we don’t make enough money to be generous. Or we convince ourselves that we need the money more than the church does. The act of giving starts with what we have, not what we think we need in order to be generous.

When we are tempted to be stingy due to a perceived lack of resources, remember Acts 20:35, “It is more blessed to give than to receive.” Giving is a way for us to honor God and acknowledge him as the source of everything we have.

The best way to get your finances under control is to be honest with yourself.

Avoid Holiday Spending Stress

Following is loosely based on an article in USNews that was titled “7 Ways to Avoid Holiday Stress”

We are finished with Black Friday and the buying season is in full swing.

But you still have time to pull together a financial plan for the holidays that will keep your bank account in the black.

So take some time before your spending spree starts to go through the following steps and keep some sense of sanity in Christmas spending this year.

Check your credit score. 

  • That may seem like a weird way to start holiday shopping
  • But if you are already in trouble with our credit score, overspending on Christmas will make things even worse
  • So it is a good idea to check your credit score before you head our shopping
  • and that may be a wake-up call to help you put some sanity into your holiday spending
  • If you are motivated to maintain or improve your good credit score you will be less likely to
    • overspend,
    • rack up credit card purchases you can’t pay back
    • or open new lines of credit when you are presented with deals that are just too good to be true.
  • We recommend using CreditKarma.com as it is a free service and will help you stay on top of your credit through weekly emails and suggestions on how to improve your score.

Decide who and how much

  • You need to plan for who and how much
  • Are you only going to buy for your immediate family
  • ]or do you want to buy for the extended family plus a bunch of neighbors and friends
  • If you only have a few people you can spend more on each one
  • If you have a lot of people on your list then you need to concentrate on buying inexpensive presents that won’t break the budget
  • BUT the tendency to overspend may be hard to resist, if you have a huge list of people

Set your budget and divide that by the number of people on your list.

  • First step in to figure out your budget for holiday in total – including gifts, travel, meals, decorations and donations
  • Then assign an amount to each of those categories
  • And figure an amount you can spend per-person
  • The more organized you are and the more detailed you are, the less chance you will bust the budget
  • Define an exact dollar amount for each person on your shopping list.
  • Once you hit that dollar amount, stop shopping for that person.

Window shop

  • Scope out purchases in advance. 
  • Use online shopping carts or “wish lists” as a way to avoid impulse purchases.
  • Select things for your basket or “wish list,” then walk away until tomorrow
  • To entice you to complete your purchase, some retailers will email coupons to those who have left a full cart on the site, making a future purchase less expensive.
  • For people who shop in a real store, do the same thing by scouting out purchases
  • Leave your purse or wallet at home and visit the stores which are most likely to have the gifts you want to buy
  • Both of these methods also help consumers avoid the scenario in which they buy one gift and then later find something else they like better.

Pick one day to go shopping with a list. 

  • When it comes time to actually buy, try to pick one day to complete all your shopping.
  • Be sure you have a complete list of specific purchases for each person on your list
  • Without a list, it’s easy to get confused and overwhelmed
    • Without a list, everything in the store is fair game to buy
    • That may mean over buying for one person and completely forgetting another one

Plan your credit card usage. 

  • You may have a budget for the holidays that includes a spending plan for everything
  • But without cash in hand, you are going to use credit to for your purchases
  • And that can mean disaster come January when the bills start rolling in.
  • There’s nothing wrong with using credit cards for holiday shopping IF you have a budget and plan to pay them off at the end of the month.
  • If you are racking up credit card debt hoping you can pay it off sometime in 2018, you are asking for trouble.

Think of alternatives to store-bought gifts. 

  • One of the best ways to avoid being financially stressed during the holidays is to skip the expensive store-bought gifts altogether.
  • This approach has benefits beyond simply saving money.
  • Maybe you can make baked goods for some of the neighbors,
  • or maybe you can offer services such as mowing the lawn once a month for an elderly neighbor
  • For family members, how about a digital picture album of fun times you shared during the previous year

The holidays are closing in fast, but there is still time to take these proactive steps to avoid finding yourself in a financially stressful situation.

Once Christmas 2017 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 1/12 of the charges you made for Christmas 2017, 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.

Seeking Godly Counsel

When we really want to buy something, how many times do we slow down enough to seek Godly counsel before purchasing it?

The seven gifts of the Holy Spirit are: wisdom, understanding, knowledge, counsel, fortitude, piety and fear of the Lord. So, if we have received the gifts of the Holy Spirit, especially wisdom, understanding and knowledge, then we should inherently know that seeking godly counsel is a wise thing to do.

The Bible gives us many verses related to seeking counsel:

  • A wise man will hear and increase in learning, and a man of understanding will acquire wise counsel (Proverbs 1:5).
  • Through presumption comes nothing but strife, but with those who receive counsel is wisdom.  (Proverbs 13:10).
  • Listen to counsel and accept discipline, that you may be wise the rest of your days (Proverbs 19:20).
  • Prepare plans by consultation . . . (Proverbs 20:18).
  • Where there is no guidance, the people fall, but in abundance of counselors there is victory (Proverbs 11:14).
  • Without consultation, plans are frustrated, but with many counselors they succeed (Proverbs 15:22).

Those are only a few of the 48 Scriptures verses I found that encourage us to seek counsel.

But how often do we actually go out of our way to seek counsel – especially when it comes to financial matters? For most people, the answer is never or not often enough!

Most of us are very proud of our independence, especially as it applies to our financial situation. When we come face to face with a decision, we don’t relinquish control to anyone or seek help–we’re independent, and we don’t need anyone’s counsel. Yet one of the best ways to avoid financial problems is to seek godly counsel before making financial decisions, especially large decisions.

So, who do you ask for counsel, and how do you go about asking? Even though it may take a little courage to ask for advice, our most trustworthy advisors are the ones who have been there all along—parents, or close, trusted friends. Tell them the facts of your situation in a straightforward manner, being totally truthful. Just tackle the conversation head on, open your heart, and listen closely.

If you are married, your spouse should be your number one source of counsel. You will both suffer the consequences of any bad decision, so it is important for both of you to agree on the course of action. If you do not agree, wait, pray and keep talking about it.  Nothing will ruin your marriage faster than making one sided decisions.

We know because that’s what happened to us. We talked around our differences but never came to a decision on which we both agreed. Many years ago, we were in the middle of buying land and working with an architect to design and build our dream house. This was at the same time my husband decided to start his own business and quit his job which paid a generous salary.

The bad news is that we were not on the same page financially. We never really had any financial issues up till that point in our marriage so we never needed to sit down and hash through a budget, talk about debt or plan for saving. The money just came in and went out.

We never thought of seeking godly counsel in an honest and forthright way.  If we did get input from anyone, our questions were couched in language that assured us of getting the answer we wanted, because of course, we knew we were right. Almost as soon as our dream house was built and the mortgage payments started, we ran into financial turmoil.

The verse from Proverbs 12:15 says, “The way of fools is right in their own eyes, but those who listen to advice are the wise.”  And we were certainly fools who thought we were right in our own eyes. The results of those actions were one of the worst financial mistakes we ever made and those mistakes almost cost us our marriage.

Like us, many people have lost a lot of money and have subjected themselves and their families to years of heartache and stress by making bad financial decisions. And what’s really tragic Is they could have avoided most of their difficulties if they had simply sought counsel from someone with a solid understanding of God’s way of handling money.

All of us should intentionally seek to surround ourselves with godly people who can counsel us is different areas. We each have limited experience and knowledge and we need the insights, suggestions and thoughts of others to make a proper decision.

The one common attitude that keeps us from seeking counsel is pride. Some people think seeking advice is a sign of weakness. It’s against our American spirit of independence to ask for help. The American mantra of “Stand on your own two feet” seems to contradict getting advice and counsel from anyone.

Yet this is totally contrary to what we see in the Bible, which encourages a spirit of interdependence in the Body of Christ. In 1 Corinthians 12:12-26, we are described as a body where in order to function properly, we need each other. As we are one body in Christ, God encourages us to seek wise counsel and to rely on each other for Godly advice. The Christian life is not one of independence from one another; we’re to be dependent upon each other and grow together in love and faith.

There are cautions when seeking counsel. First of all, it is important to be totally open and honest. Because of our pride sometimes we don’t give all the facts. We just offer up the facts that will give us the answer we want. This isn’t really seeking counsel – it’s going through the motions. So, when you ask for advice stick to the facts – all of them, and don’t disguise or hide the facts in order to sway the person to give you the answer you want to hear.

You also need to be careful about who you ask for advice. Sales people may get a larger commission by pushing you to buy a certain product. Or they may pressure you to buy immediately so they can make their sales quota. It is certainly appropriate to gather facts from experts (like sales people) when making a financial decision. But godly advice is best gotten from a person you know well and who has no vested interest in your decision other than your welfare.

If you don’t have someone in your life who can give you financial advice based on the Bible, pray for the Lord to bring that person into your life. It will be one of the best decisions you can make. A great way to find godly people is through the Compass Catholic Navigating Your Finances God’s Way Bible study. Get involved with your church community and you’re sure to find brothers and sisters in Christ who are more than willing to help and share the Catholic perspectives on handling money God’s way.

For more on this topic, connect with the Compass Catholic podcast on Podbean as we discuss seeking godly counsel.

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.”

Planning Your 2018 Vacation

Paying for a vacation is a lot like paying for Christmas, which seems to sneak up on people each year. You know Christmas is coming, so you should be planning for the costs all year. Similarly, vacation is coming so NOW is the time to prepare.

I can hear some people thinking that they can’t afford to save for vacation all year. Then the question is why they think they can afford the vacation by putting it on credit cards and paying the cost of the vacation PLUS the cost of interest.

It is easy to dream and spend countless hours planning and organizing the perfect summer vacation for the family. But the important thing is to create a plan for how to pay for it. 

Going into debt for vacation is not a good idea.  Vacations are a luxury not a necessity and you should never pay for a luxury by financing it. About 74% of Americans have gone into debt to pay for a getaway, according to a new study from financial planning company LearnVest. The study, which surveyed 1,000 adults, showed on average, Americans take on about $1,100 in debt for vacations.

In order to take a vacation and not go into debt, treat your vacation saving like any other monthly bill – figure out how much you spend on a yearly vacation and put 1/12 of that in a savings account each month. When vacation time rolls around, you will have the money set aside in a vacation savings account. Saving instead of getting into debt is a great lesson to teach your children.

To find money to save, look at everything you are spending in ALL areas and see what you can save for vacation by eliminating nonessentials, such as premium cable, fancy coffee on the way to work, fast food meals, lunch out, etc.  Making several small changes can amount to about $100 in savings a month towards that vacation.

As you think about a vacation for 2018, now is the time to start planning and saving in order to have a stress free vacation next year. Relaxing and treating yourself while you are on vacation is a great way to recharge, unless that indulgence wrecks your budget and you come home to a ton of credit card debt.

It’s possible to have a great vacation without overspending if you know when to make trade-offs. Find the parts of your vacation where you can compromise, and spend your money on what matters most to you.  

Staying in one place may be convenient, but changing accommodations during your stay can yield savings. Hotels in some big cities, such as Washington DC revolve around business trips on weekdays, leaving weekends open for tourists at less expansive rates.  At the same time, the weekends are more expensive in tourist-heavy destinations; so hotels may give you a better rate if you check in on a weekday rather than a weekend.

Investigate the area you are visiting and find free sightseeing. Monuments like the National Mall and Notre Dame cost nothing. Many museums, like New York’s Guggenheim and American Museum of Natural History, offer free hours every week or are donation-based. Consider stuffing your itinerary with free attractions. Skip the expensive attractions by planning your trip before you leave.

For road trips, prepare coolers full of meals to avoid fast food on the road. Food from home comes in handy at theme parks, where a small bite can cost as much as a full meal. Just check beforehand to make sure outside food is allowed. For bigger trips, visit local markets for snacks instead of eating out every time you get a little hungry. It’s similar to a technique you may use at home: eat cheaply to save for special occasions. But unlike at home, your special occasion on vacation may be one big meal every day.

Taxis and rental cars can be expensive. On a recent trip to Washington DC, our hotel charged $60 a DAY for parking, Needless to say, we left the car at home and took public transportation and Uber. Research the public transportation options to see if that’s a viable option for you.  We have met some interesting locals by getting lost on the subway!

Many people keep their kids shielded from financial realities which does not teach them anything about wise financial management. When planning for vacation, have a family meeting, talk about where to go, and make a vacation plan as a family. Follow up by talking about the cost of the vacation. Set up a “thermometer“ type chart on the fridge showing how much progress you are making toward your vacation savings goal.

Getting the kids involved in reaching the financial goal for vacation teaches them a lot about delayed gratification, making and reaching goals and financial stewardship. They will be much less likely to complain about cutting back if they are involved in the planning process and they can see a visual reminder of why the family is cutting back.

If you’re into vacations, you know that life is about experiences, not stuff.  You may be able to bulk up your vacation savings by selling your unused stuff to fund your vacation. Try Facebook garage sale groups, consignment shops, eBay, Craig’s List or an old fashioned garage sale

Do a Google search for “Free vacations” and you will find several options, which may or may not interest you, depending on your vacation preferences. You may be able to find a work-vacation opportunity where you can spend a few hours a day working in exchange for free room and board. Some wilderness and trail associations are looking for volunteers to help maintain the area in exchange for food and camping

Check out the Workaway website, which is for people who are interested in cultural exchange and learning. Volunteers get food and accommodation in exchange for working a few hours a day. Visits can last anywhere from a few days to a few months. Put your existing skills to good use, or try something new you would never normally get to do and pick up new skills along the way. Their site lists 1000s of active hosts in over 155 countries offering all kinds of places to stay.

We all need time away from our day to day work. Even God rested on the 7th day when he completed the work of creating the world. The key is to plan ahead so that you can enjoy your vacation and be debt free when you return home. Saving up for a big trip isn’t easy, but these strategies should help you save a little bit faster and have your trip already paid for before you leave home. 

After all, who wants to go on the perfect vacation and come home to a pile of debt?

Send an email to mailto:info@compasscatholic.org. and let us know how your family saves for vacation.

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 wide margin between the low end and the high end.

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 good for your 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 is not having an emergency fund. Personal finance experts stress the importance of having an emergency fund to cover unanticipated expenses to 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 savings to cover a $500 unplanned expense, according to a report from Bankrate.com. When the unexpected expense happens and there is not enough money 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 poverty.

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 car every five years with a $500 month 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 made on the money if you had saved it. We suggest driving used cars, avoiding the car payment altogether, and saving the extra cash for retirement and long term goals.

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.”