Should Children Get an Allowance?

We firmly believe that the earlier you teach children how to handle money and make them responsible for their own financial decisions, the better off they will be when they are ready to strike out on their own.

The tools for teaching kids about money include:

  • Giving them an allowance
  • Expecting them to do chores around the house simply because they are part of the family
  • Giving them opportunities to earn extra money
  • Monitoring and coaching them as they make both good and bad decisions.
  • The primary purpose for an allowance is to enable a child to experience the real world of money management. You can teach, lecture, and allow your kids to learn by observation, but the best way for them to learn is to have some cold hard cash in their hands to use the way they choose.

Research on school-based financial literacy efforts overwhelmingly state that classroom instruction is far too theoretical. Kids need to use real money in real situations in order to learn. And this means allowing them to fail and succeed with you in the background as a cheerleader and coach.

Some people are adamant that money should be given to a child only when they do something to earn it. But the “pay for performance” dynamic makes the child think they have a choice about whether or not to do household chores. If they don’t need money, they may shirk their chores that week.

We think the best solution is a compromise. Give your kids an allowance because that’s the best way to teach them about money. ALSO require them to do certain chores on a regular basis just because they’re part of your family. Even a child as young as three can do simple chores such as making their bed or setting the table. As they get older, additional chores can be added such as taking out the trash, clearing the table, or feeding and walking the dog.

Along with the allowance and chores they are expected to do, give them opportunities to earn more money by doing optional tasks such as mowing the lawn, washing the car, or whatever seems appropriate in your family.

An important key is to keep the allowance low enough that they’re motivated to take on additional chores, but not so low that they don’t have anything to spend.

As a parent, your role is to be a coach and a cheerleader as they learn, make mistakes and have successes. Coach them by asking questions without lecturing or telling them what to do. Ask open-ended questions such as:

  • So why do you think that $40 shirt is a good deal?
  • Would you rather have one pair of expensive jeans or 3 pairs of less expensive jeans?
  • How do you plan to eat lunch at school since you spent your lunch money on video games?

If they decide to spend foolishly, LET THEM! The best way for them to learn is to let them make mistakes and suffer the consequences.  It’s better for them to make a mistake buying a $30 blouse than a $300,000 house! If you act like the First National Bank of Mom and Dad and give them money every time they make a mistake, you are setting a precedent you’ll be expected to maintain, even when they are adults, with a spouse and children of their own.

An allowance presents a great opportunity to teach kids how to give, save and spend so be proactive about coaching them and helping them learn what to do with the money they receive. If they gain experience when they are young and learn how to give and save a percentage of every dollar they receive, it’s likely those habits will stick as they get older and earn more.

Use separate piggy banks or jars marked “Give” “Save” and “Spend” to help them understand the three uses of money. Some people advocate teaching kids a 10-10-80 approach: give 10%, save 10%, and spend 80%. Since kids have few fixed expenses, consider teaching them to SAVE a higher percentage, such as 40%.

When to begin an allowance, the amount and how often they get it is a great discussion for parents to have when the kids are very young, or even when you are pregnant.

Kids can understand certain aspects of money at a surprisingly young age. Researchers have found that children as young as two can begin to see that money is a means of exchange. It’ s an idea they can start to grasp the more they go to the store with you and watch as you hand money to the cashier and then receive groceries or clothing or whatever else in exchange.

When you think about starting an allowance, err on the early side—perhaps as young as three or four, but certainly they should have some exposure to spending their own money when they enter kindergarten.

Common ways to determine an appropriate amount for an allowance can be based on the child’s age or grade. You may want to give a 5 year old $0.50 for each year, making their allowance $2.50 per week. Or you can base the allowance on their grade plus one.  So a first grader would get $1 + $1 = $2 a week.

As for how often to give an allowance, in the beginning, a weekly allowance will provide frequent opportunities to establish the habits of giving and saving. As they get older, gradually transition “payday” to once a month. A monthly allowance helps kids learn to budget their spending so the money lasts until next month. The important thing is to increase the amount along with their responsibility each year.

A few weeks ago we did a podcast titled “Birthdays on a Budget.” One of our suggestions was to use the milestone of each birthday as a natural time to talk about an increase in the allowance and any changes to your child’s financial responsibility. As they get older they need to take on more and more responsibility as you transfer financial responsibilities from your shoulders to theirs.

Like the NIKE commercial says “Just Do It!” Get started now and make adjustments as you see fit and as your child learns and grows. The earlier your kids begin gaining some experience managing money, the better off they will be as adults.

By the time they are seniors in high school, they should be taking on all their personal financial responsibilities—clothes, entertainment, car, school lunch, etc. The only way for them to do that is for you to start training them when they are young. “Train up a child in the way he should go and even when he is old, he will not depart from it.” (Proverbs 22:6)

Listen to the Manage Your Money God’s Way podcast for additional thoughts about how to help your child become a financially responsible adult.

Financial Clutter

Recently, we met with the staff of a Catholic Credit Union. We talked about ways Compass Catholic can help their members be wise financial managers and how they can honor God with the way they spend, save and give money.

The president referred to something he called “Financial Clutter” as those things that get people into trouble financially and sidetrack them from their most important financial goals.

Making good financial decisions isn’t just about providing for the distant future; it’s about cutting down on the very real worries you feel each day, whether that means saving more or spending less, paying off credit cards and the student loans or getting rid of the mortgage.

Here are some ideas to consider to help you reduce the amount of financial clutter in your life…

Giving is a way to honor God and thank him for everything he has given to us. It’s easy to justify why we can’t be generous, and most people think once they get their finances in order, then they’ll be able to give. Our experience is that giving is the first priority. Once you start giving back to God some of what he’s given to you, everything else falls into place in your financial life. Acts 20:35 “Keep in mind the words of the Lord Jesus, who himself said ‘It is more blessed to give then to receive.'”

If you spend more than you earn, it always causes worry, stress and mental clutter. This is not to say you have to pay for everything with cash; mortgages and student loans are a practical reality for the vast majority of Americans and it’s almost impossible to rent a car or a hotel room without a credit card. Still, it’s crucial to make a realistic budget and stick to it, so you live within your means. Proverbs 21:20 “Precious treasure remains in the house of the wise but the fool consumes it.”

Most financial experts say you shouldn’t spend more than one-third of your take-home pay on housing and related expenses. This is especially true if you don’t make much money, because other bills will quickly gobble up the rest of your budget. Think of it this way: If you take home $2,000 a month but spend half that on housing, you have $1,000 left to survive. That works out to $33 a day for food, gas, clothing, insurance and everything in between for the whole family. If you stretch yourself too thin on your housing expenses, you’ll struggle to pay for everything else.

Intelligent people can disagree over precisely how much you need in a rainy day fund. But not saving anything for unexpected events, and living paycheck to paycheck is irresponsible. It naively assumes you won’t ever need the money for an emergency should something unfortunate happen.

You know that you, along with every American, should be saving for retirement in some way. If your employer offers a 401k match, it’s free money from your employer as a reward for something you should be doing anyway, so take advantage of it. Not contributing to a retirement plan with an employer match is like throwing away a gift of cash. It stays in the back of your mind and causes clutter!

There are risks with any investments–particularly if you chase aggressive, short-term gains. Higher rates of return come with higher risk, and promises of instant profits through day-trading or house-flipping often prove themselves too good to be true. Keeping greed in check is crucial–but so is planning properly to prevent falling behind. If you build up a good emergency fund and start planning for retirement early, you won’t have to take big risks out of desperation as you get closer to retirement age.

The other side of saving for retirement is being tempted to think the money in your 401k or IRA can be used early (before age 59½). Cashing out one of these retirement funds early comes with steep penalties: Federal taxes, State taxes, and early withdrawal penalties. In addition to the tangible loss of that money, there’s the fact that you still need to save for retirement.

Shifting the shortfall from one part of your budget to another is not a viable long-term solution. Worse, any money taken out of your 401k or IRA could have been growing over time–so you don’t just lose the money that’s withdrawn, you lose the lost investment returns on that money as well as wasting money by having to pay the penalty and taxes for early withdrawal.

Life insurance companies aren’t run like charities, and they set premiums based on the risk of payouts. It’s only natural, then, that an older American has to pay a higher premium for life insurance. The vast majority of folks can take out a substantial and very affordable life insurance policy in their 30s and cover their spouse and family into their 50s or 60s. The same holds true for disability insurance to protect your earnings on the job.

Along the same lines, a good will is a crucial part of providing for your family should tragedy strike. In most cases, a visit with a qualified professional for a few hours will ensure your family stays in control of any assets and avoids estate taxes–not to mention preventing any squabbling among survivors. Our Bible study Set Your House In Order, will help prepare you for the discussion with a qualified legal professional.

The bottom line is getting distracted by financial clutter can cause all sorts of problems.

Just like cleaning out the clutter in your garage, cleaning up the financial clutter needs to be done one step at a time. Goes back to old saying – If you continue doing what you have been doing, you’ll continue to get the same results you’ve been getting.

If you aren’t sure what to do to get control of your financial clutter, go to and under the resources tab, download a copy of the Compass Money Map. It will help you set priorities and meet goals to get rid of the financial clutter, and make sure it does not come back.

Tune into our podcast for more on getting rid of financial clutter.

What is a Crisis Budget and When Do You Implement it?

Unless you are one of the wealthiest people in the world, sooner or later you will probably have some type of financial setback. At some time in your life you are likely to face a family financial crisis such as a job loss, business reversal, illness, death of a family member, or military deployment of the breadwinner. Even a worldwide financial crisis can have an impact on our personal finances.

Some events can shake our world and turn everything upside down. When that crisis does come will you look at it with despair and angst or will you look hard to find the silver lining that God always provides?

Think about some crises in the Bible. Joseph’s brothers sold him into slavery. In a few hours, Job lost everything—his children, all of his financial resources, even his health. Moses was caught between the Red Sea and the most powerful army in the world. Paul was beaten, stoned and left for dead.

It would have been easy for each of these people to feel abandoned by God. Yet in each case, God used their crisis for good. When we face a crisis, it is important for us to remember that God loves us deeply and in any situation, he is with us each and every step of the way. This verse from James 1:2-4 sums it up: “Consider it all joy, my brothers, when you encounter various trials, for you know that the testing of your faith produces perseverance. And let perseverance be perfect, so that you may be perfect and complete, lacking in nothing.”

God is able to use all circumstances, even difficult ones, for our ultimate good. We can use difficulties as opportunities to grow closer to God and learn things we just could not learn any other way.

There are several things we can do to survive a crisis. The first is to have our finances in order before the crisis occurs. If you have your finances in good order, the financial impact of the crisis can be a little less stressful.

It also helps to have support through the crisis by seeking advice from Godly people who have been in the same or similar circumstances. They can be a great source of blessing and encouragement to you. You can learn from their experiences, they can tell you about resources they have used and help you avoid mistakes they made.

Focus on one day at a time. Matthew 6:34 tells us: “Do not worry about tomorrow; tomorrow will take care of itself.”  In a crisis, it’s easy to get several steps past where you are, and worry about what’s next.  The important thing is to focus on the present and not worry about the future.

In a stressful situation when we are praying for help, we expect God to resolve things in our way, in our time, exactly the way we want it to go. This just sets us up for disappointment and frustration as God does not work according to our demands. It is important for us to trust him and believe in his divine providence without giving him deadlines or directions.

One of the best things you can do to prepare for a crisis is to prepare a crisis budget. Figure out the most likely crisis and find ways to cut your budget to meet the circumstances of that crisis.  For example, if you or your spouse were to lose your job, what would you do?  If you are on commission and don’t make your quota, how would you adjust your finances? If the stock market completely tanks, will it impact you?

After you determine the most likely scenario, figure out the impact to your current income and spending. Look at your current budget. What can you eliminate? If your family income were cut by 30% how would you adjust your spending? Can you get rid of cable TV, gym memberships, music lessons, sports camps, convenience meals? What other spending can you reduce?

One reason people don’t create a crisis budget is because they really don’t understand how much they are currently spending so they cannot anticipate any adjustment. But figuring out how to adjust your spending before the crisis occurs makes it easier to make objective decisions, not decisions based on emotion. 

Most times people will face the financial challenges in a crisis by using credit cards to maintain their standard of living. This is very dangerous because you not only have a reduced income or increased expenses, but now you are adding debt payments to your expenses, PLUS interest, so you are making the situation worse.  We have seen many people in this situation and it drags them down faster and faster.

The important thing is to know how much you spend on a monthly basis – that is the only way you can possibly be prepared to adjust in a crisis.  Then implement the crisis budget as soon as you anticipate the problem happening. For example, in most cases if there are layoffs at work, you can see them coming maybe weeks or even months in advance. Or if there is a worldwide financial meltdown, how does it impact you personally and how can you adjust your spending to be financially stable?

As soon as you anticipate the crisis, implement the crisis budget.

The worst thing that is going to happen is you’ll save some money if the crisis never occurs.  The best thing that will happen is that you will survive the crisis with minimum damage to your financial future.

A good meditation verse during a crisis is from Jeremiah 29:11: “For I know well the plans I have in mind for you—plans for your welfare and not for woe, so as to give you a future of hope.  When you call me, and come and pray to me, I will listen to you.” 

In the crisis you are facing, know that God is always with you even when it’s hard for you to recognize it, and his plans for you are better than any plans you may have for yourself.

Listen to our Podcast to learn more about a crisis budget.

I Just Graduated From College – Now What?

Graduation Cap

Graduation Cap

Congratulations on getting your college diploma! Take a deep breath and relax for a second. Now focus on getting a job. If there aren’t any jobs in your field of study, find a job outside your field. It will allow you to obtain experience, work history, and money.

After you graduate, you’ll probably have a lot of expenses you may not have had in college. Developing a budget is the best way to put everything into perspective so you don’t lose track of your spending and your money is allocated to the things that are most important to you.

As you develop a budget be sure it includes saving for an emergency fund. Although it may take a while to get there, try to build the emergency fund to at least $1,000. Having an emergency fund will help prevent you from going into debt if you have an unexpected expense, such as a medical bill.

As you are creating your budget and establishing an emergency fund, look at the current debt you have. Besides student loans, the typical types of debt owed by new college grads include car loans and credit cards. Get hyper-focused on paying off all the debt that you have outside of your student loans. Pay these off a quickly as possible, paying any extra money on the smallest one while making minimum payments on the larger debts, including student loans. The key to being financially stable is not accumulating any more debt!

Once your other debts are paid off it’s time to tackle your student loans. According to Forbes, the best way to pay off your student loans quickly is to refinance them to a lower interest rate. Many lenders now offer some form of employment protection and other hardship benefits if you later lose your job or can’t afford your payments.

If you can’t lower your interest rate significantly. Refinancing is not a great idea, because you will give up certain student loan benefits such as forbearance and deferral.

Forbearance allows you to pause your student loan payments, but you must be up to date with the payments and interest continues to pile up if you request forbearance. Deferment is similar to forbearance except interest does not accrue during the period of time that your payments are deferred. Not all student loans will allow this and it may mean losing the potential of repayment incentives that could reduce the interest rate. There is a lot of fine print if you are applying for forbearance or deferment—make sure you read all the terms and conditions.

Be sure to check with your new employer to see if they have a plan to help you pay off your student debt. If your company offers assistance with student loan payoff, take advantage of it!

To help you with a financial roadmap, check out the Compass Money Map on The map lists 7 destinations and each destination has several steps. Complete the steps in each destination in order and you will build an organized financial plan.

The map shows that student loan debt is considered Consumer Debt in Destination 3 and it should be paid off prior to saving or investing. Different financial gurus will give you different answers about when you should start investing. All of their answers hinge on interest rates—both the interest you are paying on all your loans and the interest you are earning on your potential investments.

Many will say that if the interest rate on the loan is below 4% and you expect to earn 6%-8% on your investments you should start investing. But if the interest rate on your student loan is high—above 6% you should focus on paying off your student loans before investing.

One thing to consider about saving and investing is company matching investment programs. Many employers will offer to match 1%-5% to the amount you invest in the company 401k. This is free money and you should definitely take advantage of it.

A note of caution—some company matching programs restrict their contribution to shares of company stock. This isn’t bad, but pay attention to the diversification of the money you are investing. If possible, your company stock should be less than 5% of the total you have invested.

Also, keep in mind the difference between saving and investing. Saving means putting money in a savings account—drawing very low interest and almost no growth, but having the money readily available to use at any point in time. Investing is more long term. It’s money you will put away and ignore because you won’t need it for many years.

Last, but certainly not least, seek godly counsel when making financial decisions. Your parents and grandparents have a lifetime of experience and whether or not they fully understand your lifestyle, they can offer advice. They know you best and love you the most.

In the Bible, Sirach 32:15 says, “Do nothing without counsel, and then you need have no regrets.” So take advantage of the years of wisdom and life experience your parents and grandparents would love to offer.

Listen to the Manage Your Money God’s Way podcast for additional thoughts about how to tackle finances when you graduate from college.

Money Saving Ideas

Some people think in order to save money it has to be some BIG amount. Other people think it’s better to save a little bit here and there. We think it’s BOTH. It’s important to save in a big way like a bonus or a raise and it’s also important to save on the little things—where money just leaks through your fingers.

Here are some ways to keep your money instead of wasting it:

Initiate a fiscal fast. Try not to spend any money for a few days or even a week. Or eliminate certain purchases altogether, such as paper towels and disinfectant wipes. 

Avoid bank fees. Look for a bank that offers free accounts. Don’t overdraft your account. If you overdraft once a month, the average fee of $35 adds up to $420 in a year. Stick to your bank’s ATM instead of wasting two or three dollars per transaction at an out of network ATM.

Make a budget and stick to it. Track where you are spending and what you are spending on. Everyone we know who has done this has found areas where they were wasting money. Avoid places where you know you’ll be tempted to buy things you don’t need.

Save on food by packing a lunch. Meals from the drive-thru are bad for your bank account and probably your health.

According to a Harvard Law and National Resources report, Americans throw away 40 percent of the food they buy because of misleading expiration dates that have nothing to do with food safety. Just because the date comes up does not mean the food is immediately unsafe to eat. Try arranging your pantry according to the expiration date to avoid waste.

Instead of buying prepackaged food, do it yourself. You can easily make your own tomato sauce, jam, dessert toppings and spice mixtures. Avoid the fancy coffee by googling a recipe to make your own.

Comparison shop by creating a spreadsheet of items you buy regularly—weekly or at least monthly. Then check out several local stores and write down the prices.  Monitor the sales brochures at each store and you’ll know what is considered a ‘good’ price versus a really great sale price. After a few months you will also know the rotation of when various items go on sale.

Forage for dinner once a week. Look in the freezer and pantry to use items that will soon expire. You can also have breakfast for dinner. Eggs are an incredibly cheap source of protein, and there’s no reason to restrict them to breakfast.

Drink more water and less soda or juice. Water is a healthier and cheaper alternative to any other drink. Avoid the bottled water—most of it is from a municipal source, which is probably every bit as safe as the water from your tap. And all those plastic bottles are so harmful to our beautiful planet.

Control your entertainment budget by spending cash. Put the amount you have allocated for entertainment in an envelope and spend the cash for entertainment activities. When the envelope is empty, there’s no more entertainment spending.

Proactively search for ways to reduce the costs for kids’ activities.  Split the cost of private swim lessons with a friend. Carpool to soccer games with other families to save on gas. Look for ways to work for organizations in exchange for reduced or free enrollment.

Involve like-minded friends in your money saving efforts. Babysit for your friends and have them return the favor in the future. Learn how to barter. Maybe you sew or can edit resumes in return for some other service for which you’d typically have to shell out money.

Don’t overspend on kid’s clothing. On average, a child only requires three to four nice pairs of pants and five to six shirts. Buy used clothes whenever possible, especially when kids are young and grow out of clothes so quickly. Gratefully accept hand-me-downs or shop at consignment shops or Goodwill.

Buy clothing that is versatile throughout the year. T-shirts can be worn on their own or over long-sleeved shirts. Skirts can be worn on their own or over warm leggings.

Create a clothes swap with your mom’s group at church. Everyone donates professional maternity clothes or baby items when they’re done having kids, and anyone can take from the inventory.  It saves a lot of money, and provides a great outreach to new moms in your parish.

Beware of energy vampires. Home electronics in “standby” mode use energy to power features like clock displays even when they’re turned off. Plug electronics into a power strip. Turn off the strip when not in use to save. Many chargers drain power continuously, even when the device is not plugged in, so unplug the chargers when they are not in use.

Keep your thermostat low in winter and high in summer. Adjust it even more when you are away from home for an extended period.

Use vinegar creatively. The cleaning strength vinegar has a multitude of uses. Use a shallow bowl filled with vinegar to absorb cooking smells in the kitchen. If you need to clean your drains, pour about ½ cup baking soda into the drain, the follow with a cut of HOT vinegar. Let is sit for 15 minutes, then flush with hot water. Use vinegar in the yard as a week killer.  Mix 1 gallon of vinegar with one cup of salt and spray on weeds to kill them safely. Check out for 1,001 uses for vinegar.

I hope that some of these tips will be of use to you and if you think of other money savings tips, send them to us

Saving money saving is a good way to live by the verse we find in Proverbs 21:20: “Precious treasure remains in the house of the wise, but the fool consumes it.” Use these money saving ideas to KEEP your precious, hard earned money!

The Manage Your Money God’s Way podcast has more money saving ideas.

What Your Graduate Needs to Know About Money

One of the things we hear most often from people who take the Navigating Your Finances God’s Way Bible Study is; “I wish I had learned this earlier.” 

If your child is a high school or college senior, or between high school and the next step in life–either college, trade school, or a job, and if you haven’t done a good job teaching them about money, you may want to talk to them about the following to prevent some serious money mistakes in their future.

The first lesson is our role is to be a good steward of the blessings God has given to us. Once kids get this, the rest of the lessons fall into place. Unfortunately, most adults don’t understand (or live by) this premise.

The second lesson is if you don’t have the money you can’t buy it, which seems to go against everything in our society. Our consumer culture encourages people to go into debt to get what they want, which they do not necessarily need.

The third lesson is the difference between wants and needs. Needs are anything that is necessary to sustain life–food, clothing, and shelter. Wants are anything over and above basic needs. But think about how many times you hear someone (teen or adult) saying “I need to get the new phone.”  But, is an upgraded phone a basic necessity required to sustain life?

Lesson number four is the cost of debt. People waste money paying interest on credit cards, not understanding what those “easy monthly payments” really mean over many years. Basic behavior modification means teaching them the danger of using credit cards to fund a lifestyle they can’t afford.

The fifth lesson is that their financial success is not about how much money they earn, it’s about how well they manage what they earn. Discipline is the key to financial success and bad money habits are hard to break. As their income rises over time, teach them to maintain the same lifestyle. An increase in income can lead to a lifestyle increase, which means more expenses, and before they know it, they are in a revolving door that is hard to escape.

Number six is to help them define their budget based on less than their income. Budgeting has a negative connotation, but a good budget is simply a way to be sure their money is spent on what is most important to them. Spending less than they earn means money is available to save.

Setting short and long term goals is another major factor in financial success. Weekly, monthly and yearly financial goals, lead to financial success. Undefined goals will never be achieved.

A major financial goal is saving at least 10% of their income before spending on anything else. That 10% leads to the magic of compound interest. Money invested earns a return, the next year the original investment, as well as the earnings, are earning an additional return. Time is as important as the amount of money when it comes to compounding. Compound interest works FOR savers and compound interest works AGAINST debtors.

The fancy coffee on the way to work is only $5, so nobody thinks about it.  What they miss is that $5 every day is $25 a week. Over the course of a year, that adds up to a whopping $1,300. Comparing $1,300 to their yearly income is a lot different than looking at a measly $5 daily purchase.

Going off to college means the offer of thousands, if not hundreds of thousands of dollars in student loans. Typically, students understand about 2% of what they should understand about student loans. Encourage them to take out the least amount of debt in order to complete their degree on time, and help them understand how their field of study will affect their ability to repay the loans.

Avoiding debt goes beyond student loans. Somebody will always be willing to loan them money for a car, a couch, a computer, a ring, a wedding, a vacation, a cat or anything else which might tickle their fancy. Saving for a purchase almost always makes more sense than borrowing, especially on lower-price items.

And the last lesson is for them to pay attention to their credit score. If they have good financial habits, the credit score and report will take care of itself. But there is always the possibility of a mistake or stolen identity. Encourage them to get a free credit report from each of the reporting agencies once a year.

The above ideas are more about behavior and attitude than about the amount of money they make.

Financial sense is as much psychology as math. There is a verse from Proverbs 21:20 which sums up the thought behind managing money wisely: “Precious treasure remains in the house of the wise, but the fool consumes it.”

The Manage Your Money God’s Way podcast has more on how to encourage your graduate (or senior) to become wise about how they give, spend, save and manage money.

A Cost Cutting Mindset

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.

Debt Payoff Plans

Paying off debt is a lot like going a diet. There are many ways to do it and some seem simple and easy like skipping meals; fad food diets; replacing meals with shakes or bars. The list could go on and on.

The best way to lose weight and keep it off permanently is to change your lifestyle by eating a balanced diet and exercising, but that takes discipline. Which is why so many people tend to ignore the hard stuff and look for the fast easy fix.

The same concept applies to paying off debt. There are many fast easy ways to get out of debt, but not all of them work and many of them are unhealthy for your financial future.

So with that said, let’s talk about some debt payoff strategies that sound like a quick fix, but they may not be in your best interest.

Debt Consolidation is a loan to pay off all your debts. Sounds good on the surface, but the only thing you are doing is trading one debt for another. If you are not disciplined and managing your money smartly, you’re simply moving debt from one place to another. The worst part is that you feel good because now instead of making eight payments to different credit card companies, you only make one payment which often leads to running up additional debt on the credit cards.

The other danger is that you have given a debt consolidator control over your debt payments and your financial future. If you ever use a debt consolidator, you need to retain the responsibility to monitor what they are doing by keeping up with the payments they’re making on your behalf.

Home Equity Loans are another option that seems like an easy fix. The equity in your home appears to be available money. If your house is worth $200,000 and you owe $150,000 on your mortgage, you may think you have $50,000 available for debt payoff. But if you run into financial trouble in the future and can’t make the equity loan payments, you may be at risk of losing your home.

Related to the home equity line of credit, selling your house may be a good idea. If you have too much house and the upkeep and maintenance are costing a bundle, you may be better off with a smaller home. Do the math. What is the cost of buying and selling? What percentage of your income is spent on your current house and what percentage do you estimate will be spent on the new house? Once you do the math, it may make more sense to stay put, buckle down and get serious about paying off the debt or selling and downsizing may be your best option.

Taking out a 401(k) loan is another perceived easy fix as it sounds like you are borrowing your own money. But look deeper. An early withdrawal from your retirement account (any withdrawal before age 59 ½ is considered early) means paying a 10% penalty plus income taxes on the withdrawal. If take a $30,000, the penalty will be $3,000. Taxes at your current income tax rate—say 28%—means the government will keep another $8,400.

This leaves you with just $18,600…. NOT $30,000 for debt payments. You actually wasted $11,400 in taxes and penalties. If you are 30 years away from retirement the future value of that $11,400 in your 401(k) at 7% is $86,799.  Taking money out of your 401K is borrowing from your future and wasting money in penalties and taxes. 

If you have a healthy emergency fund, it may be tempting to use that money to pay off debt. But don’t do it! As soon as that emergency fund is empty, emergencies pop up. The car needs a new transmission. There’s an insurance claim with a big deductible you have to pay. There’s a layoff at work. Avoid draining your emergency fund even if you’re doing something positive like paying off debt.

We all get frustrated with our jobs and you may decide to start your own business to control your own destiny. When that thought occurs, be careful. Typically, two-thirds of new businesses fail within 10 years. You may need a huge investment to get started. And where will the money come from to cover daily living expenses until your business becomes profitable? If you take out a loan to get started and do not make enough money to support yourself, you’ll be digging that debt hole deeper. (We’ve done this and it was a disaster!)

Scattering a little bit of extra money on all the loans may seem like you are making every effort to pay off debt, but it won’t get you very far very fast, and the lack of progress can be depressing. Instead of scattering a little bit of money in all directions, concentrate on paying off the smallest debt first.

Use any and all extra cash on the smallest debt and make the minimum payment on the others. As you knock out the smallest one, apply what you were paying on the smallest to the next smallest.

This method is known as the debt snowball, and according to the Harvard Business Review, it’s the most effective way to pay off debt. Their study found that people’s perception of debt pay off progress was not based on a dollar value, but rather on the portion of the balance they succeed in paying off. So paying off a $500 loan completely was more motivating that paying $750 on a variety of loans. This aligns with other research on the power of small wins to keep people motivated.

Playing the lottery in hopes of winning may be fun to think about, but it is never a viable solution. The odds of winning either the Powerball or Mega Millions are roughly the same: 175 million to one. Despite those odds, one-third of Americans believe that winning the lottery is the only way they will ever retire. Money you use to play to the lottery could just as easily be flushed down the drain to achieve the same results. Lotteries thrive by building a sense of false hope.

Instead of looking for the fast, easy fix, use a budget and work hard to pay off debt with a plan. It is the best way to succeed.

We have seen many people pay off enormous amounts of debt when they add prayer along with doing their part in making the necessary lifestyle changes. God hears our prayers, but we have free will to act or not.

If all you’re doing is praying and not taking responsibility in action, that debt is going to hang around forever! Instead of praying and then doing absolutely nothing to improve your financial situation, do both! It definitely works—we have lived it!

Tune into our podcast for more info about various plans to pay off debt.

10 Easy Steps to Improve Your Monthly Budget

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.

Birthdays on a Budget

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.