Are you trying to make ends meet, save for an emergency fund, plan for retirement, pay off debt or cut expenses? All of these goals may mean changes in your behavior and when you are trying to change behavior one of the most important things you can do it to pray. For most people praying is the last thing they would think about doing. But praying gives you a sense of meaning and purpose you just can’t get any other way.

Matthew, Chapter 7:7-11, is titled The Answer to Prayers. “Ask and it will be given to you; seek and you will find; knock and the door will be opened to you. For everyone who asks, receives; and the one who seeks, finds; and to the one who knocks, the door will be opened.”

Start your cost-cutting mindset with prayer and continue to ask for help as you move forward.

Waiting 90 days to decide on a large purchase is an excellent way to avoid instant gratification. Use a wishlist and write down the item you want to buy. Get 3 prices and wait 90 days. After 90 days if you still want that item and the money is in your budget, buy it.

Usually, one of two things happens. You decide you really don’t want or need that item or there is something else want more. When that happens, cross off the first item, put the second item on the list, get three prices, and wait 90 days. After 90 days if you still want it and the money is in your budget, buy it. Waiting gives you a better perspective on whether it’s truly worth the money.

The 10-second rule is another way to avoid impulse purchases on small everyday items. Whenever you pick up an item to add to your cart, stop for 10 seconds and ask yourself why you’re buying it. Think about whether you actually need it or not. If you can’t find a good answer, put the item back. This practice will keep you from making small impulse buys.

Spend time not money entertaining your children. Most children, especially young ones, can be entertained inexpensively. Play ball in the backyard. Head to the park. Take a walk. Read a story. Play a game. What your children want most of all is your time. You’ll find money in your pocket and joy in your heart when you give them time, not money.

Words can make us change the way we think. “I need” is one of those terms. Do you need it, or do you want it? Discerning the difference between needs and wants is a huge step in controlling money. Spending is not bad, just be clear on the difference between needs and wants.

“I saved” is another of those terms. When we buy something on sale and avoid paying full price, we usually say we saved $xx.00. But unless that money actually went into your savings account, you really did not save it, you avoided spending it. So, when you talk, be sure to note the difference between not spending money and actually saving money

It is so easy to use the words “my” and “mine” when referring to the stuff in our possession. When you say “my car” there is a sense of your personal self-worth tied to that car. So instead say “the car,” not “my car.” Changing the words, you use acknowledges psychologically that the car is an item and it is not tied to you personally.

It’s almost impossible to rent a car, get a hotel room or make online purchases without a credit card. The key to keeping credit card spending under control is to make the cards hard to access. Hide your credit cards in a safe place in your home, don’t keep them in your wallet. Or freeze them in a block of ice.

It’s easy to spend online when you have your card information stored in an account–just click and buy. The best way to break this habit is to simply delete your card from the online account so it takes time and effort to enter the credit card information.

Simply having a plan goes a long way toward taking action and paying off debts early is one of the surest ways to put money in your pocket over the long run. Make a giant progress bar that starts with the amount of debt you have and ends with zero. Keep this reminder in a place where you’ll see it often. Each time you pay down a little bit, fill in a little more of that progress bar. It can help keep your eye on the goal and is a good way to involve the family in the effort to pay down debt. 

Take a different route to work, which is powerful if you “automatically” stop to buy something on your commute. Select a different route that doesn’t go by the temptation, even if the new route is a bit longer. The money you save on any unnecessary indulgences will add up over time.

Exercise more. Go for a walk or a jog each evening, practice stretching, or do light muscle exercise at home, which can lead to huge health benefits. Your body and wallet will thank you.

Don’t beat yourself up when you make a mistake. Even if you make ten good choices, it’s easy to beat yourself up and feel like a failure over one bad choice. Learn to see past mistakes for what they are–lessons that were meant to teach you something. Sometimes the best life lessons are learned through life experience, good or bad, so embrace your past and don’t run from it.  Promising to do better and setting goals can help keep mistakes where they belong–in the past.

Ask for help and encouragement from your inner circle. When you’re feeling discouraged, sit down and talk to the people you love and care about the most and ask them for help. Tell them that you’re trying to trim your spending and you’d love it if they would offer suggestions and support.

They might have some personal insights for you, and at the very least, the discussion will help them understand your situation better. Remember that there are a lot of people out there fighting the same fight.

Find a Bible verse to support your goal.  There are so many Bible verses that apply to day-to-day life and using one to inspire and motivate you not only helps you reach your goal; it also helps you live your faith on a daily basis. Go to the American Bible Society website search and type in a key word to find your inspiration verse.

And remember to wrap all your good intentions in prayer. Pray for wisdom, for strength for guidance and for perseverance.

The Manage Your Money God’s Way podcast has more on how to change your mindset.

It’s easy to think that one day we will have enough money. We’ll be satisfied, happy and content. But that one day will never arrive if we never make it happen. And today is the day to start.

What can you do TODAY to set yourself up for financial success? We have 10 tips to help you on that journey. The first few are very practical tips and the last several are mindset issues.

(1) Track Your Spending

It all begins with knowing where your money is going. Unless you’re tracking how much you’re spending and what you’re spending it on, you have no idea if your money is being allocated to the things that are most important to you.

Anyone who has done this has been surprised. And they weren’t surprised to find that they were overspending by $10 dollars a month, what they found was they were overspending by $50-$60 dollars a week on some things!

One person thought they spent $50 a month on lunch. By tracking their spending, they discovered that lunch was actually costing $200 a month. When they looked at the facts, they made a decision that other things were a higher financial priority than a restaurant lunch.

(2) Review your payments

The second way to improve your finances is to look at your monthly payments and figure out if the costs of standard items have escalate each year (like cell phones, cable, yard services, etc.) The impact of small increases over a long period of time can add up if you aren’t paying attention.

(3) Look at your PMI

You may be wasting money paying private mortgage insurance (PMI.) PMI insurance is required if you have less than 20% equity in your home. If your house is worth $100K and your mortgage is $95K you only have 5% equity and you have to pay PMI. If your house is worth $100K and your mortgage is $75K you have 25% equity.

If your original equity was less than 20%, and you have owned the house for several years, you may want to check out what your home is worth now, and how much equity you currently have. If your equity is more than 20% you may be able to negotiate with your mortgage lender to eliminate PMI.  Or it may be time to refinance your mortgage completely, especially if refinancing means you’ll have 20%+ equity, no PMI, a lower interest rate and be able to pay off your mortgage faster.

(4) Earn More

Another good way to improve your monthly cash flow is to make more money, which is easier said than done.  If you are due for a raise, ask for it. Document the reasons you deserve a raise and be sure they are well defined. Make an appointment with your boss to present those reasons in a polite, professional manner. If getting a raise is impossible, maybe you can get a part time job or turn a hobby into a money maker.

(5) Analyze Car Insurance Costs

Look at the latest invoice from your current insurance company then get a few quotes from other auto insurers for the same coverage. Once you have some facts and figures, give your agent a call and discuss the difference between your current rates and the quotes. Most of the time, your current insurer will match the competitor’s price, but if not, change insurers.

(6) Understand the Difference Between Wants and Needs

Understanding the difference between wants and needs is an easy money saver. Every advertisement we see is telling us that we NEED what they are selling. All we really need is food, clothing and shelter.

(7) Question Every Purchase

The way to discern between wants and needs is to question every single purchase. This helps you make fact based buying decisions and eliminates spontaneous purchases. It doesn’t mean you can’t spend money.  It just means that when you do spend money you are making a conscious, responsible decision.

(8) Set Your Priorities

By knowing the difference between needs and wants, you can be sure you have the money to meet your needs and also figure out which of your wants have the highest priority.

You must focus on what is most important to you in order to have any hope of improving your finances. Would you rather eat lunch at a restaurant, or is your dream to retire early?

(9) Stop Shopping for Entertainment

Shopping as a form of entertainment is definitely a money waster. We were working with a couple who said “Every time we go to the mall, we spend $100.” The easy answer to that is “Quit going to the mall!” If you are shopping as a form of entertainment, you are certainly going to find things to buy, whether or not you need them.

(10) Don’t Compare Yourself to Others

Does envy tempt you to over spend? Comparing yourself to others can be a form of jealously, which is one of the works of the flesh that we are warned about in Galatians 5:19-21. When a friend buys a new car, goes on a luxury vacation, has the latest fashion or beautiful jewelry we can feel envious. It’s tempting to go out and buy the same thing. And that may make us happy for a few hours or a few days. But if we waste money and can’t reach important goals, sooner or later we’ll regret it. Instead of feeling envious, be happy for your friend and focus your thoughts and actions on your own goals and dreams.

People think a budget is all about being deprived. Our experience is that a budget is all about being focused. The success of budgeting comes from cutting away things you barely notice and diverting that money to something that has a higher priority in your life.

If you are trying to improve your monthly budget, start today. You may have some detouring, back tracking and restarting but if you never begin the journey you will never make any progress.

As the Nike ad states, “Just do it!”

Listen to our podcast for more on this topic.

A child’s birthday should be fun, but not so over the top that it drains the family finances. The focus should be on thoughtful gifts, fun simple activities and family traditions, not on spending money, exhausting yourself and driving the kids into a frenzy.

Time is the one truly valuable thing in our lives, and there’s nothing more worthwhile than to give your time to you child. An ideal way to spend time with your child on their birthday means paying attention to them, talking with and listening to them, and engaging in some kind of activity together.

It’s rare that a birthday party works out to be on the same day as the child’s actual birth date, so try to make the day of the birthday special. Wake them up by singing Happy Birthday. Make a special request breakfast or maybe buy a special birthday dish that the birthday person uses for all their meals that day.

Gather the family to make a homemade dinner of the child’s request. It’s much less expensive than a restaurant meal where the kids have to wait for a table then sit still through dinner. And if the whole family participates, it gets the other children involved in doing something special for the birthday person.

After dinner, let the birthday child pick a family activity that everyone can do together. The activity needs to be free and involve the whole family. Ideas are: movie night or game night, trail walking, water balloons, egg toss, sledding, or swimming. There are any number of free fun activities to do. The key is to spend time together as a family creating memories.

A birthday is a good time to talk about “growing up” as each birthday is a step toward independence. You can help your child mature by marking the milestone with a discussion about their new age, which helps make the day special in a different kind of way.

Talk about the changes to chores, bedtime, allowance and privileges. There are any number of ways to acknowledge how your child is growing up and add special meaning to each birthday. Not only is this an opportunity for focused one-on-one attention, it also maintains the sense that this day is a day of growing maturity.

The time spent together is much more important than over the top expensive birthday parties, so don’t even think about keeping up with the neighbors. If other parents want to have inflatable slides and bouncy houses and pony rides and balloon animal makers and all kinds of crazy things, it doesn’t mean you have to do it. The kinds of decisions made by other families can be different than the decisions you make in your own family. Learn to use the phrase “That’s not how we do it on our family.”

Rather than receiving a mountain of gifts, be sure you get one thing your child really wants. It’s a lot easier to control spending if you’re giving a relatively small number of gifts. Once the child opens the third gift or so, each subsequent gift begins to seem less important and less interesting. 

After a gift-giving event, people tend to gravitate toward just a few of their gifts even if they liked all of them. In other words, once you get past the third gift or so, the rest are overkill.

Be sure their gift is the one thing they REALLY want. People (kids are people too!) tend to appreciate receiving the one thing they want most even more than receiving most of their wish list. It seems counterintuitive, but kids tend to be thrilled when they receive the main thing they wanted, so their other desires tend to fall by the wayside in comparison. When you really nail something they want, nothing else matters.

Keep the party simple and the guest list small.  The more children, the more overwhelming it will be for you and your child. Large parties are expensive, and if they are too large, the kids can’t even play with each other in the chaos. Center the party around a simple activity or easy to run games, such as an art party where the kids can paint birdhouses or  pin the candles on the cake. Lay out bubble wrap on the floor and have children take turns gently walking across it. Whoever doesn’t pop any bubbles wins! Have a bowl full of cotton balls and an empty bowl in front of the child. Hand them a spoon and blindfold them. Whoever moves the most cotton balls into the empty bowl wins!

Rather than buying a birthday cake from a bakery, make it at home. Homemade cakes are far less expensive than bakery cakes and you can get everyone in the family involved in making it. Let the birthday child personalize the cake. If your child loves the purple cake with the lopsided icing truck, that’s all that matters!

Who says you have to have cake? Maybe your birthday child would prefer a different dessert such as ice cream, pie, strawberry shortcake, cupcakes, cheesecake, or cinnamon rolls,

An expensive party and a pile of expensive gifts might be exciting for a child, but does it really mean anything? Does the birthday celebration build family and friendship bonds? In the end, it’s the time you took that makes the memories special.

Building those bonds and creating memorable moments doesn’t happen by throwing money at a big expensive party and lots of gifts.

It happens with time and attention, which are always the best gifts you can give to your child, period. If you give those gifts, then the physical gifts are secondary. Teach your child to appreciate the things in life that are really important–relationships, fun, sharing, conversations, traditions and spending time together.

Those gifts are so much more precious than any amount of money you can spend.

Checkout the Manage Your Money God’s Way podcast for more.

John Kennedy, CFP® has been our guest for the last two weeks on the Manage Your Money God’s Way podcast.

Last week we talked about what to consider when you are looking for a financial planner, the questions to ask and the background work you need to do. This week is about the benefits of using a financial planner.

John and his wife have taken both the Navigating your Finances God’s Way and Set Your House in Order Bible studies. They could be considered financial experts. John is a certified financial planner and has responsibility to his clients as a fiduciary. John’s wife has a career in corporate finances. Even though both of them had financial backgrounds and were “numbers geeks” the Compass Bible studies were critical to their financial communications as a couple.

The Navigating Your Finances God’s Way study taught them skills that are helpful to everyone, especially a married couple. With John being a financial planner, it was easy for him to slip into the role of expert when it came to family decisions on how to give, save, invest and spend. And it was easy for his wife to allow him to assume that role. A game changer for them from the Navigating class was that all financial matters in a marriage are joint decisions between a husband and wife who need to be in agreement. He also indicated the studies opened his eyes to situational awareness of working with a married couple in his financial planning practice. 

The experience of John and his wife are in support survey results that indicate 78% of the couples who took the Navigating class together said their marriage was strengthened. Money can be a controversial area in a marriage and the Compass Bible studies provide a non-confrontational platform for financial discussions.

Early in their married life, John and his wife set a priority of saving 20% of their income and because that goal was set, they were able to stick to it through career and life changes. Their savings is allocated for various purposes; emergencies, retirement, college funds, investments, and Health Saving Accounts.

According to John (and many other financial planners), the best time to start saving for retirement is the first day you start working. The more you save and plan ahead, the longer time your money has to grow, based on the principle of compound interest. So, do yourself a favor and start early.

The amount you should have saved for retirement varies based on age and income. Income during working years relates directly to the income you will need in retirement. How much you should have saved for retirement at any point in time is based on your age.

The link below will help you walk through plans for retirement. Pages 13 and 14 provide a checkpoint for how much you should have saved based on your age and current salary. For example, on page 13 if you are 50 years old, making an income of $70,000. You should have 3.9 times your salary ($273,000) saved to provide the income you need to maintain your current lifestyle in retirement.

J. P. Morgan Guide to Retirement

If you find your savings are short of the benchmark for your age, take advantage of any and all matching funds your employer offers. If you pass up the matching funds, you are leaving free money on the table, so why not take advantage of it! 

Very few people understand the employer match. They may think they can afford to save one or two percent, but they think 6% is too much. What they fail to understand is that employer match is based on pre-tax money so your take-home pay is not reduced by 6%.

Here’s an example. Joe makes $2,000 gross per pay period and his deductions are 22%. With no retirement savings, Joe’s net salary is $1,560. Joe decides to maximize the 6% employer match. Six percent of his gross pay is $120, with the employer matching Joe’s contribution dollar for dollar. Joe adds $240 to his retirement account each pay period.  His take home pay is reduced by $94. ($2,000 – $120) x 22% – $1,466. That is a deal too good to pass up!

In addition to matching retirement funds, many employers also offer matching funds for Health Savings Accounts (HSA), which are for high deductible health care plans. These funds provide triple tax advantages as they are from pre-tax income, they grow tax-free and are used tax-free. There are rules for use and most of them will roll over to the next year if not used. The HSA is different from a Health Flex Spending Plan, so be sure you know which you have and the policies you have to follow.

Many employers are now offering an incentive for their employees to pay off student loans. If you are in your early 30s, retirement savings is impossible if you are buried in student debt. If your employer offers matching funds to pay off your student loans, jump on it!

The benefit of using a financial planner is that they will take a look at your entire financial picture and provide you with the information you need to make informed decisions to help you meet your goals. If you have not saved anything and are worrying about retirement, they can take a look at your total financial picture and give you advice on how to get from where you are to where you want to be in a logical and organized fashion. Maybe you need to increase the amount you are saving by one percent every 6 months, or maybe you need to concentrate on paying off high-interest debt or maybe you just need to rein in your spending.

A financial planner can provide wise unbiased counsel to help you meet your goals by taking a look at your total financial picture and offering advice.

Listen to the podcast here. 

Would you be better off repairing your current car, or is it really time to buy another one? There’s no clear-cut answer to this question, but analyzing the pros and cons for each option will help you make a more informed decision.

First of all, decide if you really need a car. For today’s average family, owning at least one car is a necessity and two cars makes life much easier in many ways. But consider the possibility of using public transportation or carpooling to eliminate the need for one of the cars, which may result in significant savings.

Once you decide that a car is a necessity, it’s usually less costly to repair the existing car than to replace it with a newer model (unless your car is totally worn out with over 200,000 miles or more.)

The least expensive car is usually the one you are driving right now. Repairing it will keep you from making a hasty purchase you may regret in a few months. It will also give you more time to save up and get your finances in order before spending a lot of money on a replacement vehicle. 

You may want to seriously consider replacing your car if you are running into one of the following scenarios.

• The repairs are becoming more frequent, and the costs are hard to keep up with. 
• The car often leaves you stranded, putting you and your family in a potentially dangerous situation 
• The repair in question will cost more than half the value of the vehicle.
• You had already planned on getting something new, but your mechanic clues you in on an impending major repair on your old car.

Even if you’ve taken good care of your car, some high-priced repairs are unavoidable, due to excessive wear or time itself. Rubber belts and hoses dry out and crack, metal on rotors warp or wear too thin, and electrical parts stop working. Wear-and-tear items such as axle boots, belts and brake rotors will eventually need to be replaced.

The timing belt has long been a big-ticket item on high-mileage cars. On many cars, it needs to be replaced at around 100,000 miles. Dealership service advisers will often recommend replacing the water pump and the other drive belts in the car at this point. This “timing belt package” can cost between $600 and $1,000. Repairs such as this begin to surface between 90,000 and 120,000 miles. Yearly repairs for the typical American car average about $1,200.

If your car isn’t paid off, do everything in your power to keep it until it is paid off.  Otherwise, the current car debt is simply refinanced into the new car loan and it is easy to get upside down on your car loan where you owe more on the car than it is worth.

Here are a few reasons why buying a newer car might be in your best interest:

• You don’t want to fret about future breakdowns.
• Old cars can be unpredictable.
• The constant trips to the repair shop are disrupting daily activities like getting to work or taking the kids to school.
• Each time you repair one thing, something else breaks.

All these are reasons to move on.

If you are not yet faced with making the tough decision to fix up or trade in your vehicle, there are steps you can take to prevent or avoid costly repairs. Get your car maintained at its proper intervals to avoid problems and breakdowns.  Use the maintenance guide to learn the recommended service intervals for your vehicle. We recommend finding a good, reliable local mechanic as a less expensive alternative to a service departments at the dealership.

If you’re experiencing issues with your car and don’t know whether things are likely to get worse, look for advice on message boards and forums for the make and model of your car. Other people have probably been down this road before you. You can get a preview from them of the problems associated with your vehicle as it ages.

Everyone seems to have a theory on when to repair a car and when to get a newer one. But you know your needs and your car’s history better than anyone else, so use these tips as a guide, not gospel.

Buying a newer car might seem like the easy way out of a high repair bill, but depending on your circumstances, it may plunge you into debt.

On the other hand, a car that’s teetering on the edge of oblivion can keep you awake at night. And it’s hard to put a price tag on the peace of mind that a newer vehicle can bring.

It’s better to part with that car on your own terms rather than waiting for it to break down at exactly the wrong time. If you make the decision while the car still has some value, you can sell it or trade it in, turning the cash into a down payment on your next car.

To avoid an emotional reaction, be sure to analyze your budget, and seek counsel so you will make a wise decision and be a good steward.

The Compass Catholic Podcast offers more on this topic.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Compass Catholic Podcast offers more on this topic.