Don’t Retire – Rewire

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Health Care Sharing Plans – Part 2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Typical disclaimers read …

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

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

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

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

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

Your 2019 Financial Plan

Looking for more control of your finances in 2019? Read on….

Controlling your finances means building a foundation for a secure financial future. Developing a financial plan for the year is similar to building something. “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). Having a plan and managing your money and possessions is all about being good a good steward of the blessings God has given you.

Start your 2019 financial plan with a review of your 2018 finances. How did your actual spending compare to your budget? If you’re using a budgeting app, budgeting software or a spreadsheet, it should be easy. Just run a report for the full year, January through December, by category. Review each category to see if you over or under spent in any category. If you’ve been using a budget (aka spending plan) every month, nothing on your year-end report should be a surprise to you.

Looking at each category from an annual perspective will give you insight into your yearly spending. While you are looking at the year in total, it is time to contemplate changes that will occur in 2019 which may have an impact on your budget. Has your income increased? Have any of your expenses increased or decreased? Are there any large expenses on the horizon for 2019? Are you preparing for a life change such as marriage, retirement, buying a house, or a new baby, which will all impact your budget?

Once you have thoroughly reviewed last year’s budget and changes that will occur in the new year, you have a good basis for creating your 2019 budget.

If you do not have a budget from last year to use as your starting point, now is the time to create one.  Set up categories to track your spending and estimate how much you spend in each category. For the first three months of 2019, track what you actually spend against your estimates in each category. This will be the beginning of a budget. At the end of March, average the first three months of spending in each category to come up with a preliminary monthly budget by category.  Be sure to include those expenses which only come due quarterly or yearly. Refine your budget each month as you have more and more data. Do this for about 6 months, then reevaluate your monthly averages to define a solid budget to use as a tool for managing your income and outgo.

Another way to check on your financial progress each year is to use the Money Map, which is available on the Compass Catholic website. This map takes you through the steps to reach True Financial Freedom, which means you have no debt and you have saved enough money to fund your retirement. It provides you with a step-by-step plan to accomplish short term, mid-term and long-term goals to reach financial freedom.

There are seven destinations on the Map and each destination has several steps. Look at each destination in order and check off the steps you have completed in each destination. Once you’ve done that, go to the earliest destination that is incomplete and complete the open steps in order. As you complete once destination, move to the next.

Our third suggestion for a yearly checkup is to calculate your net worth by listing your assets, and subtracting your debts.

Your assets are the value of everything that you possess (house, cars, electronics, furniture, jewelry, boat, and tools, along with the value of checking, savings and retirement accounts, etc.)

Debts are everything you owe (credit card balances, bank loans, mortgage loans, lines of credit, car loans, student loans, even loans from Uncle Fred.

Your goal is to have a positive net worth—the value of your assets is more than what you owe, not a negative net worth—you owe more than your assets are worth.

Hopefully, from year to year, you will see your assets grow and your debts decrease, which means your net worth will be increasing and you are making progress to true financial freedom!

This is a long term journey. We still are using the basics from the plan we developed around 2003. The plan has been reviewed, updated and adjusted each year as our life changed. Over that period of time, we became empty nesters. We both changed jobs several times. We bought and sold houses in different states, had salary increases and decreases, retired, and qualified for Social Security.

Every year as life changed, we tweaked the plan based on the changes in the previous year, or the changes we anticipated in the new year. We also reviewed and updated the plan when those life changes occurred. The plan always provided a sanity check at each step along the way

The Lord tells us in Psalm 32:8, “I will teach you the way you should go; I will instruct you and advise you.” Developing a plan and wrapping that plan in prayer will help you become a good steward of all the blessings God has showered upon you.

We encourage you to become financially free so you are liberated from the bondage of debt and can serve God in the unique way he has called you.

Don’t Go Into Debt for Christmas

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

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

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

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

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

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

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

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

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

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

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

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

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

If you’re not sure how to rein yourself in when it comes to shopping for your kids, try using the Five Gift Rule:  1. Something they want; 2. Something they need; 3. Something to read; 4. Something to wear: 5. Something to share. It’s a great way to organize your gift giving without breaking your budget.

Kids remember Christmas because it’s a fun time of year. They remember it because they get to spend time with you, their parents. They get to eat cookies and sing fun Christmas carols. So, don’t put too much pressure on yourself. And don’t set unrealistic expectations for the kids where every gift-giving event is over the top. They aren’t going to count each gift and ask the price of everything under the tree. And if they are counting gifts and calculating how much you spent, what does that say about what you’re teaching them?

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

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

Remember what Pope Francis has said about money: “If money and material things become the center of our lives, they seize us and make us slaves.” Don’t become a slave to our culture’s ideas of what Christmas should be!

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

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

Money Matters in Marriage

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

Maybe they should.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Money Matters in Marriage!

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

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

Listen to our podcast. 

Things Frugal People Never Do

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Listen to the Podcast

Are You Headed for Financial Disaster?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Have a Successful Garage Sale

How many of us have garages so full of stuff that the cars remain in the driveway? How many basements are full of boxes containing who knows what? Or even worse, how many of you are paying money to a storage facility because there is no room in your home for all your stuff?

In the Bible from Luke 12:15-21, we read: “Then he said to the crowd, ‘Take care to guard against all greed, for though one may be rich, one’s life does not consist of possessions.’” Many of us are caught up in accumulating stuff yet those possessions don’t have any lasting meaning and they clutter up our life.

One of the best ways to eliminate excess clutter is to have a garage sale and use the proceeds to build up the emergency fund or pay down debt. And if you have an emergency fund and no debt, donate the proceeds to charity.

Garage sales should not be done on a moment’s notice. Like everything else, they’ll run better with planning and organization.

The most popular days are Friday and Saturday mornings, but you can add Thursday if your schedule allows. You’ll get a larger crowd if you start early because people won’t have to interrupt their day to attend your sale. Late Spring, early summer or fall are the best times to have a sale. Check the local calendar and avoid special weekends in your area—such as a local festival or college football games.

Once you have a date, check with your local city government to see if a permit is required. Talk to your neighbors to let them know you are planning on having a sale and invite them to participate.

Decide how to advertise your sale—newspaper, fliers, and social media. Take advantage of local advertising such as the homeowner’s association newsletter, or a community events page in your local newspaper. Be sure your ads include your address as well as the dates and times for your sale. The most popular garage sale items include furniture, kids’ toys, and collectibles, so highlight those in your ads.

Gather your sale items well ahead of time by going through each room, the garage and the basement. Pick up anything you don’t want or haven’t used in months and put it in a staging area.

Don’t underestimate the value of what you find either; people will buy anything from old CDs to unwanted bottles of perfume. After all, the worst case scenario is that something doesn’t sell.

Before pricing your items, visit other garage sales in your area to check the going price for certain items. Price your items individually rather than grouping them into a box with one price sign. As the garage sale progresses, people will get the boxes mixed up and you’ll have a hard time keeping up with prices. Make sure the price is clearly marked on each item. Don’t set prices that are too high, thinking that people like to haggle on the price, as you may lose some customers.

Plan ahead for markdowns. Whether it’s for an individual item or an end-of-day sale, be prepared to reduce prices at some point, especially on items that are not selling.

Set up (as much as possible) the day before the sale. It will make the first hour less hectic. Remove all non-sale items from the area. Have an extension cord handy for testing electronic equipment.

Make your sale easy to find. Create signs with directions to the sale. Large bold black letters on a white background with very few words are best for visibility. What looks large when you have it on the table can be hard to read from a car. Make sure your sign says “Garage Sale” and include your address or an arrow pointing towards your house.

Make your stuff easy to find and easy to see. Keep like stuff together—all the clothes, garden equipment, toys, or tools should be displayed together. Tables are a great way to make items visible. Set up the tables so there is not so much stuff that the table is a mess as soon as the first customer looks through it.

Use the sturdiest tables for the breakable items, and keep those breakable items off to the side and up against the house or a fence to keep people from knocking that table over.

If at all possible, have clothing on hangers. It is easier to look through items on hangers. You can use a garment rack or a clothes line. Most shoppers don’t enjoy digging through piles or boxes. Create a dressing room using a shower curtain or sheet in the corner of the garage.

Make sure you have plenty of cash on hand to make change, otherwise you may lose a sale. Decide how you’ll manage the money. A carpenter’s apron gives you lots of room for money, notes and your cell phone. Or you may want to set up a check out table where you take the money and hand out change. Either way, keep your money safe.

Grab a comfortable chair and put it in a visible location. Greet people as they walk up, but don’t hover over them as they shop. In an ideal world, a garage sale would work like a mall. People would come in, peruse what’s available, grab what they wanted, pay, and leave. However, garage sales are as much a social event as a shopping event. People are going to ask questions, and they’re going to pick through everything. Let them shop at leisure and don’t act pushy.

Have a supply of old newspapers and grocery sacks to wrap and bag customers’ purchases.

Set up a 10-cent table for children to look through. They may have brought their allowance and want to spend it. Plus, it keeps them busy while mom or dad are shopping. If your children are willing to sell some of their toys, games or clothes, have each one of them label their items with different colored stickers.

Have a free table for broken items or things with missing parts. Remember one man’s junk is another man’s treasure. Post signs in strategic locations that say “Everything is sold as is” and “all sales are final.”

No matter how successful your garage sale is, you’ll probably have leftover stuff. Before the sale, investigate charities where you can donate leftovers that are usable and in good condition. Don’t drag leftovers back into the house. Before you go to the charity, be sure to list everything you are donating and ask for a receipt. File the receipt and use it for a charitable tax deduction on your income taxes.

Garage sales are a lot of work, especially if you’re not used to holding them. You’ll probably spend several hours organizing and pricing items, writing ads, and getting your supplies, plus more hours on the day of the sale.

But after it’s over, you’ll hopefully have extra cash instead of piles of unused stuff. And you can free yourself from putting too much importance in all the stuff you have accumulated. Remember, Jesus said “Your life does not consist of your possessions” so be aggressive in clearing the clutter!

Join us on the Compass Catholic podcast for more ideas about having a successful garage sale.

Get Rid of Your Mortgage

A lot people think the tax advantages of owning a home are greater than the advantages of paying off the mortgage early. But that tax advantage may not be adding as much to your bottom line as you imagine. Keeping a mortgage because of the tax advantages is a waste of money.

If you pay $5,000 a year in interest on your mortgage and are in the 25% tax bracket, the tax advantage to you is $1,250. That does not mean you get back $1,250 on your taxes, it means you can deduct $1,250 from the amount of income you earned. That means you paid $3,750 in interest to get back a portion of $1,250. The math does not make sense.

Additionally, mortgage interest is only deductible if you itemize your taxes. If you are married with children, you may get a larger tax break by taking the standard deductions rather than itemizing in order to get the mortgage interest deduction.

Eliminating the mortgage early means no more money paid in interest on that loan. You may want to begin by looking at refinancing to a shorter-term mortgage. Short term mortgages usually have interest rates a quarter to three-quarters of a percentage point lower than 30-year mortgages. But refinancing means closing costs. And a quicker payoff means higher monthly payments.

Let’s say you have a 30-year fixed-rate mortgage for $200,000 at 4.5 percent. Your monthly payment is $1,013 (Principal + Interest only.) Five years later, you refinance to a 15-year loan at 4 percent. Your new monthly payment is $1,349 (Principal + Interest only) Your monthly payment increased by $336 each month. Doing so pays off the mortgage 10 years earlier and saves you more than $60,000 in interest (if you exclude closing costs on the refi).

When considering a refinance, figure in the closing costs to be sure you are really coming out ahead financially. Also take into account how long you plan on living in your current house. If you plan on moving in less than 5 years, it’s probably better to just stick with the mortgage that you have.

If you can’t refinance, pretend to refinance by adding more money to your monthly mortgage payment. You can get all the benefits of an early payoff without the costs of refinancing by paying more in many different ways. You can also revert to paying the “normal” payment if you run into financial problems.

Each mortgage payment is made up of principal and interest. In the early years of a mortgage, most of the money you pay is interest and as the loan amount decreases, more money goes to the principal. Your goal is to pay as much in principal as possible in order to decrease the amount of the loan and get it paid off faster.

On a $200,000 30-year 4.5% example, in the first year your mortgage payments will total of about $12,000. About $3,200 is principal and $9,000 is interest payments, leaving you with a loan balance of about $196,800. If you make an extra principal payment each month in the first year (about $270/month), your loan balance would be reduced to about $193,000, saving you $9,000 in interest charges and taking a full year off your mortgage.

Another way to pay off your mortgage early is to make one extra monthly payment each year.  Save 1/12 of a payment every month, and then make an extra payment every 12 months. Making one extra payment each year on a 30-year mortgage, means you’ll cut 4 years off your loan.

If your lender allows it, cut your mortgage short by making biweekly payment. Make half of your mortgage payment every two weeks. That results in 26 half-payments, which equals 13 full monthly payments each year.  To calculate a bi-weekly payment, locate the principal and interest portion of your payment on your monthly statement and simply divide that number by two. Using our $200,000 30-year mortgage at 4.5%, your monthly payment would be $1,013.37 and your bi-weekly payment would be $506.69

Using ‘found’ money to pay off the mortgage works alone or with other strategies. Use any extra income that is not figured into your budget to make additional payments on your mortgage. It could be a bonus at work, a tax refund or an unexpected financial windfall. These will all help you get rid of your mortgage months or years faster.

Let’s say you have a 30-year fixed-rate mortgage for $200,000 at 4.5 percent. In year five you pay an extra $10,000 in a lump sum. Doing so pays off the mortgage in about 28 years and saves you thousands of dollars in interest payments. The downside to this approach is that it’s hard to predict the mortgage payoff date and it is so easy to funnel that extra money towards things other than your mortgage

Making an extra house payment each quarter knocks over 9 years off your mortgage and saves over $50,000! This one requires some upfront planning since making an extra mortgage payment each quarter is a large sum of money.

Before you make any changes to the amount you are paying on your mortgage, talk to your mortgage company to be sure you understand how to designate the additional payments and how they will handle them. Some lenders only accept extra payments at specific times or may charge prepayment penalties.

If you are thinking of using bi-weekly payments, some lenders will refuse to accept them because they will not accept any partial payments. It is very important to look at your mortgage documents and talk to your lender to be sure you are following the terms of your mortgage. When you make extra payments, always check the next statement to make sure your payment has been applied properly.

If you want to get serious about paying off your mortgage quickly, check out our mortgage payoff calculator ( – Resources – Calculators).  These calculators will help you estimate how quickly you can pay off your mortgage and become debt free.

Think of the amount that you could save if you didn’t have to pay the mortgage every month and the many other ways that mortgage money could be used. Saving for retirement or college will become much easier once that mortgage is gone. You can become more generous to causes that are close to your heart. And you may be able to save enough money to travel to the places you’ve dreamed about.

Your mortgage is probably the largest debt that you have. Which also means that you are paying the most interest on this loan.  Sirach 20:11 tells us “A man may buy much for little and pay for it seven times over.”

Every time you pay extra on your mortgage, each subsequent payment reduces the total balance of your loan. Paying off a mortgage early is not easy but when you make small sacrifices to pay off your mortgage early it is a great blessing to your financial future.

Join us on the Compass Catholic podcast for more about how to pay off your mortgage.

Money and Generation Z

A “Millennial” is a person who reached young adulthood around the year 2000. Generation Z (also known as Post-Millennials) is the generation following the Millennials. The oldest members are somewhere between 18 to 22 years old.

The Gen Z attitudes about money were impacted by hardships of their parents during the 2008 recession, along with the boom market that we’ve experienced during the past 6 years.

The financial research firm Raddon analyzed data from 2,500 teens between ages 16 and 18 for a report issued last year. They found: “Generation Z is actually remarkably aware financially, more than we expected them to be.” Two-thirds of them already have a financial account. And according to the report, teens were three times more likely to have taken a financial education class or seminar as compared to millennials.

The financial education and awareness is a real positive for Gen Z. They are also quite tech savvy. Since they have never known life without the internet they turn to the internet for advice on everything, which could help or hurt them. Technology can be a helpful learning tool.  Apps like Robinhood, STASH or ACORNS make it easy to save, invest and learn.

But, anybody who has used the internet knows that it’s both good and bad. Financial problems can’t always be solved by an online search, and incorrect financial information could be a click away. It’s simple for teens and young adults to find information about saving, spending and investing.  But it’s not so easy to figure out which advice to follow and which to ignore. A financial neophyte can be easily led in the wrong direction based on poor online advice.

Fortunately, many teens turn to their parents for financial advice which is good, as long as mom and dad have a reliable financial grasp of the essentials. Sirach 3:1-2 offers fatherly advice: “Children, listen to me, your father; act accordingly, that you may be safe. For the Lord sets a father in honor over his children and confirms a mother’s authority over her sons.”

While Generation Z is the most tech-savvy, they may not always understand the consumer protection differences between financial technology companies and banks. FDIC insurance protection covers deposits in banks. That means each depositor can be reimbursed up to $250,000 should the bank fail. However, the balance held in an online payment service doesn’t get that same protection. Online services don’t operate under the same regulations as banks and don’t have the same consumer protections.

Many Gen Z’s will use their debit card on a regular basis without understanding the difference between credit cards and debit cards. If lost or stolen, credit cards are more secure as the maximum loss is $50. The maximum loss on a lost or stolen debit card can be as high as $500. With a debit card, the money comes out of the account when the transaction takes place. If there is not enough money in the account, many banks offer overdraft protection for a $35 fee. Buying a $6.00 fast food meal with an overdraft fee attached to it, means spending $41 on fast food. 

Generation Z seems to have become debt-averse, which is great but sooner or later they’ll need to establish a credit history and the only way to do that is to take out a loan or use a credit card. As this generation matures, they may find it beneficial to focus on the smart use of debt rather than avoiding it altogether. A mortgage is almost always a necessity for those wishing to buy a house, and those without any credit history may find it difficult to qualify for favorable loan terms.

Generation Z operates in a digital world, and most financial companies haven’t progressed to being all digital. Generation Z needs to be mindful of making poor decisions because they lack in-depth knowledge and have chosen digital investment strategies, rather than working with experienced financial professionals. Financial professionals may help them avoid making a money mistake that can have long lasting impacts.

In the past, keeping up with the Joneses meant a big house, a fancy car and all the material goods you could possibly desire. The trend nowadays focuses on experiences. Today’s young adults see the world through social media. In their quest for new/better experiences they could spend more than they realize, thus creating debt. Whether it’s for experiences or stuff, debt is still debt.

Gen Z seems more interested in part-time work, gigs and being entrepreneurs rather than full-time traditional employment, which is not bad – it’s just different. Teens who follow online celebrities via YouTube, Instagram and Snapchat may think celebrity and fame are at their fingertips. There is an assumption that if you carve out a personal brand there is a way to monetize it. Obviously, that can’t happen for everyone and there is a need to fill many less glamorous traditional jobs that still pay good money and are necessary in our society.

In this fast-paced, digital, online world, Gen Z may find it hard to slow down when facing major financial decisions such as a job change, investing or home purchase. At these times, it is very helpful to go to a quiet place where they can spend uninterrupted time prayer, reading the Bible, and seeking the Lord’s direction. In this care, old-fashioned is better!

Join us on the Compass Catholic podcast for more about Money and Generation Z.