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.

Cheap vs Frugal—Is There a Difference?

What some people call being frugal, other people call being cheap.  But there is a difference between the two.

The dictionary definition of cheap is: not costing a lot of money; of low quality; not worth a lot of money; not willing to share or spend money.

The definition of frugal is: careful about spending money; using money or supplies in a very careful way.

A cheap person will invest a lot of time and energy in order to save a dollar or two, but the time and effort they expend may not be worth the amount of money they save. A cheap person will spend an afternoon repairing a $2 piece of equipment.

Their whole focus is dollars and cents, without regard to other areas of their life. They’re also willing to take advantage of social situations to avoid spending money. To me, cheap has a negative connotation, as it refers to a person who often doesn’t consider the value of their time, their energy, or the friendship and goodwill of others. They value money above all else, and they may make spending choices that can alienate others socially. A cheap friend will demand to go to the least expensive restaurant, regardless of what anyone else in the group thinks. They are the person who will pay for their part of the meal precisely down to the penny, but not include any money for the tip.

A frugal person wants to spend less money but the money-saving decisions are made with a balanced lifestyle in mind. A frugal person knows enough to balance saving money against other areas of life such as time, energy, friendship, faith, love, and health. The frugal person tends to account for the impact on things such as relationships when deciding if a money-saving tactic is worthwhile.

A frugal person might haggle for a lower insurance bill, but never take advantage of friends in a social situation. A frugal person might reuse a takeout container but won’t invest the time to wash a flimsy sandwich bag.  A frugal person will make small sacrifices of their own resources—time and energy—to save money, but they generally won’t impinge on others to do so, nor will they sacrifice large quantities of their own resources to save a few pennies.

Here is an example of the difference between being cheap and frugal. There are two different types of trash bags in the store. The price on the first one is $30.00 for 300 bags or $0.10/bag.  The price on the second one is $25.00 for 200 bags or $0.12/bag.

The ten cent bag sounds like a better deal, doesn’t it?

But taking into account the entire picture, the $0.10 bag the cheap person bought is so flimsy, two bags are needed to hold the trash, making the cost per use $0.20. The bag the frugal person bought cost $0.12 cents each, and had the more expensive purchase price, but was $0.08 cheaper per use.

In order to be frugal, not cheap, it is important to compare both the price you pay when you buy something against the cost per use for that same item. A cheap person merely looks at the price but the frugal person views the larger picture and considers the overall cost.

Being frugal means balancing money savings against other factors. You can save money where it makes sense, but you will also pay more for a product where paying more is a better deal for your whole lifestyle.

Here’s another example. A person jogs for exercise. The frugal person will buy the running shoes that best protect their feet and are appropriate for their use. Their decision is made with their overall health in mind, not simply the cost of the shoes. However, they will take advantage sales or coupons to buy that running shoe as inexpensively as possible. The cheap person simply buys the least expensive shoes whether or not the shoes will offer proper support and protection.

Cheap people use price as the bottom line. Frugal people use value as the bottom line.  

Cheap people are driven by saving money regardless of the cost. Frugal people are driven by maximizing total value, including the value of their time, effort and the use of the product.

Being cheap is about spending less; being frugal is about prioritizing your spending so that you can have more of the things you really care about. 

Cheap people are often afraid to spend money. They are willing to sacrifice quality, value and time in order to cash in on short-term savings.

Frugal people are resourceful with their spending; maximizing their dollars, so that they can fund big-picture wants and dreams.  

I consider myself to be frugal. I plan lunch and dinner so we use every bit of leftovers. I use up every bit of the products we buy by standing ketchup and other bottled products on their head to completely empty the bottle. I use a teeny tiny spatula to get all the product out of a make-up tube. I cut off the end of a toothpaste tube to get a few more nurdles of toothpaste out of it.

But I do not see myself as cheap. I do everything possible to maximize the money we do spend. But I also splurge on the areas where I am passionate (and where the money is in the budget!).

While we DO encourage people to be frugal, we do not encourage you to be so cheap that your life is miserable. Being a good steward means a balancing act by spending money on what is important to you and saving money in those areas that are not so important. Being frugal is about balancing income, giving, saving and spending with a stewardship mindset.

Be frugal, not cheap. Proverbs 28:22 tells us “Misers hurry toward wealth, not knowing that want is coming toward them.”

Life is short—enjoy it but be responsible!

Join us on the Compass Catholic podcast for more about why being frugal (not cheap) is important!

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 https://www.justice.gov/ust/credit-counseling-debtor-education-information 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.

Lifestyle Inflation—How to Avoid it

Lifestyle inflation is accepted as a normal part of life in America. It means each time your salary increases, so does your spending in an effort to achieve some perceived level of lifestyle where you will finally be happy. In fact, you are considered abnormal if you aren’t constantly striving for more bigger and better stuff.

The problem is that no material thing will result in never ending happiness, and we can get distracted from an authentic Catholic life when we try to keep up with the cultural norms.

The best way to avoid lifestyle inflation is to detach your spending from your income. Set a standard of living you are comfortable with, and stick to it, even when your income increases. Just because you are making more money does not mean you have to be spending more money

One way to put that extra money into perspective is to calculate the real increase to your spendable income.

After giving, taxes, and other related payroll deductions are subtracted from your gross salary, a raise can have a smaller impact on your spendable income than you think. If you get a raise of $500 a month it looks like an additional $6,000 a year. But after you subtract about $200 a month for payroll deductions and another $50 for increased giving, the real addition to your monthly income is $250. Over 12 months that $6,000 increase is only $3,000 in real spendable dollars. While that’s a gracious plenty, it’s not enough to dramatically change your lifestyle.

Calculating the bottom line on your spendable income gives you a dose of reality. Once you calculate your raise versus your net gain, you may find that the increased income has better uses that an inflated lifestyle.

A much better approach is to step back and contemplate your life goals. What is it that you want out of life? What are your goals for the next 5, 10, and 15 years? Is buying more stuff going to fulfill those goals? Or in 10 years will you regret the money spent on all the useless stuff you bought?

When you define and work on your goals, life is much more satisfying. You may change your mind about where you want to be in 15 years but any worthwhile goal will still move you in a direction that will be positive even if the end state changes.

It is easy get off track when you live your life in order to impress other people. When I see someone driving a fancy car, I have a fleeting thought that goes somethings like this: “Nice car—glad I don’t have to pay for it!” Because what other people drive really does not affect me at all. Don’t fall into the mindset of trying to impress other people with what you have, because they simply don’t care! And let’s be realistic, you really don’t know what other people think. If you are spending your hard earned money to impress other people you are making an assumption that you are impressing them, but you may not be.

Live your life and make your financial choices according to what you care about, not what you think the people around you care about. If you truly stop worrying what other people think, the whole impact of lifestyle inflation disappears. Don’t waste your time and energy trying to impress people who are not involved in your day to day life.

Many of the things we enjoy most are completely free. For example, do you have more time and focus on your friends if you have a potluck dinner at home or do you have more time to focus on them in a noisy crowded, expensive restaurant?

The potluck at home is much more relaxed. You don’t have to worry about parking or waiting for your table to open up or being rushed out the door so the restaurant can turn the table over. You and your friends can linger over dinner as long as you want to. Plus, if you have friends who are also avoiding the lifestyle inflation bandwagon, you can all save money by having dinner at home instead of going out to a restaurant.

Why are you having dinner with friends? Is your purpose to spend money or to enjoy time with your friends? Once you get to the bottom of WHY you are doing something, it makes it much easier to concentrate on what is really important and eliminate the potential for lifestyle inflation.

We have found that the best way for us to stay on track and keep ourselves motivated is to spend most of our time with people who think like we do, who share our faith and who want what’s best for us.

Make a conscious effort to fill your life with people who share a set of values with you. You don’t want everybody to think alike in all situations but being in conflict with the people who are closest to you isn’t a good way to live your life. Concentrate on spending time with those people who will support you, understand you and encourage you.

When we get on the lifestyle inflation merry-go-round we spend so much time and effort looking forward to what we want that we often forget to be content with what we already have. If you aren’t grateful for what you have, you’ll never be grateful for what you get. If you are thinking about upgrading the kind of car you drive, stop for a minute and say a prayer of gratitude that you already have a car to drive. If you are thinking about buying a bigger house, stop for a minute and say a prayer of gratitude that you have someplace warm and safe and dry to live.

In 1 Timothy chapter 6 we hear that if we have food and clothing we should be content and we also hear that we brought nothing into the world and we shall take nothing out of it.

We encourage you to avoid lifestyle inflation and be content with the blessings the Lord had bestowed upon you.

Listen to the Compass Catholic podcast for more about lifestyle inflation.

Signs You Are Financially Stable

Before we learned how to manage money according to the Bible, we were financially unstable. We had a ton of debt, no budget, the credit cards were maxed out and we had no long or short-term savings.

Over the years, we have changed our money habits and helped a lot of people do the same thing. We have seen people move from financial chaos to financial stability.

Listed below are the signs of financial stability to help you discern where you are on the journey. None of these items stands alone but looked at as a whole, they indicate a healthy financial future.

1. You know that everything is a gift from God. This is not conventional financial wisdom and you would probably never hear this from a financial planner. But recognizing that everything comes from God—even your finances—gives you a sense of perspective that you just can’t get any other way. This knowledge calls you to be a responsible steward and puts money in a perspective that you just can’t get from any financial expert.

2. You and your spouse are on the same page financially. Finances can wreak serious havoc on a marriage. Financial stability, on the other hand, means you and your spouse working towards common goals. You are also totally open and honest about all your finances and this is important whether you are a newlywed or have been married for decades. There should not be any financial secrets in a healthy marriage

3. You are not worried about the future. Being financially stable means you have a good handle on your finances and you are comfortable knowing how much money is coming in and going out each month. You are not worried about those bills that are looming next week or how you are going to pay for retirement. A financially stable person pays their bills each month with no surprises and no worries

4. You can sleep at night. Not worrying about the future means you can sleep at night without the thought of how you are going to pay the bills. Peace is one of the biggest blessings of being financially stable. There is nothing worse than tossing and turning all night because financial worries are keeping you awake.

5. You can handle a $400 financial emergency. A majority of Americans can’t pay for an unexpected expense of $400 without using their credit card. If you are able to handle an emergency expense, it’s an indicator that your finances are in order. A financially stable person isn’t afraid or worried about missing a paycheck because they have funds in place to cover emergencies and temporary budget blips. If you can’t handle an emergency expense of $400, start now to build that emergency fund. Even if you are only able to save a little bit each paycheck, you will be in much better financial shape than you are now.

6. Your credit cards are a convenience not a necessity. Nothing can ruin your financial stability faster than using credit cards to pay for necessities because you can’t afford to pay cash. Nothing is wrong with using credit cards if you pay them in full every month. But if you are using credit cards to subsidize a lifestyle you can’t afford, you are headed for big problems. Think about it—using credit cards and not paying them off means you are paying even more than the cost of the item once the interest is calculated on your credit card balance.

7. You are saving for your future. It always seems like there is enough time to save for the future in the future. A financially stable person saves for the future NOW! People think that they have to have lots of money or reach a certain level of income in order to save and invest, but that’s a mistake. Being financially stable means you save and invest on a regular basis. Whether it’s a 401(k) plan or some other type of account, you’re actively saving every month. Think about savings as a gift you are giving to your future self.

8. You have a low debt to income ratio. Your debt-to-income ratio measures your monthly debt obligations against your income. Lower is better. You can get a mortgage with a debt-to-income ratio as high as 43% percent though that would be incredibly foolish as that would mean almost half of your income is assigned to debt payments. The lower your debt-to-income ratio is, the closer you are to being financially stable.

9. You are not underwater on your car loan or your mortgage. According to Edmunds.com, more than 60 percent of car loans are over five years in length.  Additionally, the average car payment is over $500 per month! A financially stable person sees cars as a depreciating asset and avoids owing more than the car is worth. Same thing goes for your home. Owing more than your home is worth means you bought too much house or your down payment was too small. Your house may or may not appreciate in value, so you want to have as much equity in the house as possible.

10. Paying off debt is a priority. Financial stability means getting out of debt. Attacking debt should be a high priority. Debt enslaves you to the lender and restricts your freedom.  A financially stable person either has no debt or is working to get rid of all debt.

11. You live below your means. Financial stability means living on less than you earn. It’s easy to inflate your lifestyle each time your income increases. But a financially stable person has discerned a lifestyle level and learns how to be content at a level which is independent from income.

12. You track your spending in some fashion. Being financially stable means you know where your money is going and how it is working for you. There are lots of tools and apps from banks, credit card companies and financial planners to help you track your spending. Find one that works for you and use it!

13. You can handle large purchases and plan for them in your budget. A large purchase can be anything from buying a car to getting the roof on the house replaced. Regardless of what it is, financially stable people can make large purchases because they have planned for them. And they do not make large purchases on a whim.

14. A job loss or reduction in income isn’t the end of the world. Losing a job can be traumatic, but if you are financially stable that job loss is less traumatic. Financial stability gives you more flexibility since you have an ample emergency fund and other types of savings. This allows you to survive financially when you are looking for a job. It also provides a financial cushion so you don’t have to jump blindly into any job because you desperately need the income.

15. Your financial net worth increases each year. A financially stable person seeks to grow their net worth year over year. While some of it is out of your control when you invest in the stock market, many other things are in your control. You’re avoiding debt, you’re saving more so your financial cushion is increasing each year.

16. You control your money—not the other way around. As Pope Francis has said, “Money must serve, not rule.” Financial stability means you have control so you get to decide where your money goes. Your money does not control what you are able to do.

17. You can buy what you want. Financial stability provides the freedom to buy what you want because you have planned for it. When you have an important purchase to make, you can afford it because you planned ahead. You don’t buy something on credit and then try to figure out how to pay for it. The other half of that statement is that you know what you can afford, but you don’t buy stuff because you can afford it or spend money just because you have it.

18. You have financial plans and goals. A financially stable person plans for the future. They save for retirement, buy life insurance, save for their children’s college education and have an emergency fund. Financial stability means you plan for the future and you have family goals such as taking a special trip or adding a room to the house.

19. You got rid of your bad habits. It’s crazy how much money gets wasted on bad habits that really don’t do anything to increase the value of your lifestyle. A financially stable person eliminates those money wasting habits and spends their hard-earned money on what is important.

20. Your credit score is a nice high number. A financially stable person has a good credit score so if and when they do need to borrow they get the best rates possible.

21. You are a generous giver. A financially stable person has a regular amount of money dedicated to planned giving—such as at Mass each Sunday—and they have a financial cushion which allows them to respond to special giving opportunities as needs arise. You’re able to give with ease and not fear what being generous might do to your finances.

22. You never incur bank fees. A financially stable person doesn’t bounce checks because they track their spending and know what is in their account. Plus, they don’t want to waste money paying overdraft fees and bounced check charges.  

It’s important to remember that none of us are perfect and we all make mistakes and have hurdles to overcome. It’s also important to remember that financial stability is an ongoing journey, not a destination. Being financially stable means you are a faithful steward. You are making good choices that honor God in the way you spend, save and give the money he has entrusted to you.

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

We share 22 items to help you gauge your financial stability—what’s your score?

The Christmas Bills Have Arrived – Now What?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Do you have any creative ideas for Christmas savings?

What Does Your 2018 Financial Plan Look Like?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Are You Being Honest With Yourself?

 

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

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

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

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

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

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

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

We are also being dishonest with ourselves if we think that the next thing we buy will make us happy. Happiness is a state of mind and while you may get some temporary satisfaction out of a new possession, it will never bring happiness for long. Setting yourself up to be happy based on buying things puts you in a never-ending cycle of “what’s next?” It’s hard to be happy if you never stop and appreciate what God has already given you.

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

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

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

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

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

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

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

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

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

Get Real About Your Finances

Let’s face it, none of us are perfect. We all make mistakes. Some mistakes are big and some are little and many mistakes are a result of bad thinking, because we are not acknowledging reality.

Unrealistic thinking about our current financial situation can result in significant mistakes that harm our financial future. In order to combat these financial mistakes, take a look at your finances realistically and be totally honest about your attitude and how well or badly you handle your money.

Let’s dig into those areas where you may not be entirely truthful with yourself.

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

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

We can also fool ourselves if we think that the next thing we buy will make us happy. Happiness is a state of mind and while you may get some temporary satisfaction out of a new possession, it will never bring happiness for long. If you set yourself up to be happy based on buying things you will be in a never ending cycle of “what’s next?” It’s hard to be content if you are always looking to buying the next thing instead of appreciating and being grateful for what you already have.

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

We can also fool ourselves by justifying our debt because “everybody has debt.” There’s the school loan, the car loan, the mortgage, the second mortgage and all the credit card debt.  If you are using debt to subsidize a lifestyle you can’t afford, you are just doing bad math. If you spend more than you earn, it always catches up with you.

It doesn’t mean you have to pay for everything with cash; mortgages and student loans are a practical reality for the vast majority of Americans. But if you are digging yourself deeper and deeper into debt each month by fulfilling your WANTS, sooner or later you will find yourself in a hole so deep that you can’t climb out of it.

The debt cycle mistake is most often made when you don’t manage your spending versus your available income. Try writing down everything you spend for a few months and organize your spending into categories. (Here is a helpful spreadsheet.) Once you have a few months of spending in a format you can review, it will help you develop a spending plan so you can manage what’s coming in vs what is going out. In order to gain control and spend less than you make, it’s crucial to live within your means.

If we convince ourselves that we don’t make enough money to save anything it’s another big mistake. You may not be able to save a significant amount of money but if you are not saving anything, sooner or later you will run up debt. You are ignoring the fact that sometime in the future you are going to have a financial emergency. It may be a health issue, an accident, an appliance that needs to be replaced or a major repair to the car. But those unexpected expenses hit everyone. And if you haven’t saved any money, the only option is the credit cards or a loan.

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

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

And considering that everything we have is a gift from God, our biggest mistake is thinking that we don’t make enough money to be generous. Or we convince ourselves that we need the money more than the church does. There are many ways we can justify not giving. But the act of giving comes from what you have, not what you think you need in order to be generous. No amount is too small.

Giving is not done because God needs the money, it is done as a way for us to honor him and acknowledge him as the source of everything we have. When we are tempted to be stingy due to a perceived lack of resources, remember Acts 20:35, “It is more blessed to give than to receive.”

The best way to get your money straight is to be honest with yourself.

How to Pick a Bank and Avoid Fees

We’ve dealt with quite a few banks over the years, as we’ve moved from one location to another (we are currently living in our 9th house) and we’ve usually picked our bank based on how convenient it was to our house. That is definitely not the best way to make a decision about where to keep your money.

There are lots of options when deciding where to bank. There are regular ‘brick and mortar’ banks, which can range from small local banks to large mega-institutions.  Another option is the Credit Union, which is typically organized as a not-for-profit company, affiliated with a business, branch of the military or educational institution. There are some Savings and Loan institutions which originally started as a mutual association to benefit both depositors and borrowers.  And one of the newer choices in an online bank.

In order to make a decision on which type of bank is right for you, discern why you need a bank in the first place. Are you required to use an automatic deposit by your employer in order to get paid?  Do you need a checking account, savings account or a credit card? Do you want to establish a relationship with a bank in order to secure a home mortgage or a car loan?

Whatever type of institution you are considering be sure your money is insured. The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the US government that protects the funds of depositors in banks and savings and loan associations. All federal credit unions are insured by the NCUSIF (National Credit Union Insurance Fund). State-chartered credit unions may be insured by the NCUSIF, or might have their own state insurance or private insurance.

The typical accounts covered by insurance are checking, savings, money market deposit accounts and CD’s. Deposit insurance typically does not cover other types of financial products such as stocks, bonds, mutual funds, life insurance policies, annuities or securities.

Look at the bank’s website to determine how closely their services meet your needs. Are their locations and hours convenient for you? Can you access the bank when you are in a different location? Does the bank have 24-hour security monitoring so you are able to report a stolen card or fraud transaction off hours? Will you have access to online banking? Are there requirements for a minimum balance?  Are there limits to electronic transactions?

And one of the most important things you need to know is their fee structure.  Ask what situations result in a fee and what are those fees.  Because not knowing this little tidbit can hit you right in the wallet. According to a CNN Money report from February 2017, in 2016, the “big three” banks earned the following in fees:  $1.1 billion in ATM fees; $2.3 billion in maintenance fees to keep accounts open and $5.4 billion in overdraft fees.

It wasn’t that long ago that if the bank received a check that you had written and you didn’t have enough money in the bank to cover the check, they would send the check back to whomever you wrote the check to marked with a big red NSF stamp, indicating that there were insufficient funds in the account to pay the check.

The bank would charge you a small fee (@$10) and you would also have to pay a small fee to the business which tried to cash the check. Today most banks will cash the check, even if you don’t have money in your account and charge you an overdraft fee, sometimes as much as $35 per check.  The legal amount for NSF fees varies by state.

A Pew Charitable Trusts report from December 2016 said that, at that time, more than 40 percent of banks in the U.S. shuffle transactions to maximize overdraft fees.  For example, if you have $100 in your account and have the following charges in this order: $75; $25 and $115, the bank may reorder your transactions so the $115 is deducted first so both the $75 and $25 charges result in overdrafts, thus the bank can charge you twice for two overdrafts, rather than the one which would have occurred if the transactions had been processed in the time sequence order.

Here are some tips that will help you avoid paying ANY bank fees. The first step is to have a clear understanding of the fees and go with the bank that has the lowest fee structure, based on your requirements.

Keep your check register up-to-date and record all transactions (checks; ATM and debit cards) every day. Also, be sure to keep track of related fees for using an out of network ATMs or monthly fees for your checking or savings accounts.

Balance your checkbook and savings accounts every month. If you have any questions or find any errors visit the bank and ask questions until you understand. It’s your money and you have every right to understand what the bank is doing.

Have an EMERGENCY FUND! Overdrawing your checking account by even a few pennies can trigger some hefty fees. Protect yourself by adding a small cash cushion to your account and don’t let your account go below that cushion.

In order to keep track of your cash cushion, sign up for online alerts with your bank or credit union. They will send you an email when your checking account balance dips below a certain limit, say $50 or $100.

Steer clear of “bounced check coverage” or “courtesy overdraft protection.”

Many banks and credit unions enroll customers into courtesy overdraft programs when they open their checking accounts. But you are supposed to agree with this option so be careful when opening an account at the bank. If you aren’t sure that your bank did you the ‘courtesy’ of enrolling you in a super-expensive protection program, check the fine print of your account agreement or call your bank and ask. If you are enrolled, ask to opt-out of the program and be sure to follow up in writing.

If you feel you need overdraft protection, signup for a program linked to a savings account, line of credit, or credit card. You might pay an annual fee for this service and a small fee for each overdraft, but you will be guaranteed protection if you overdraw your account. Be sure to read the fine print when signing up for one of these services.

If you prefer to use debit cards rather than cash, be careful. Merchants can place holds or blocks on your checking account when you pay by debit card. These blocks can be more than the purchase amount, especially for gasoline, rental car and hotel purchases. They do not actually take the money out of your account, but the block does affect your available account balance for a day or two.

Remember that debit cards don’t have the same protections against fraud as credit cards. If someone obtains your debit card number and pin, they can clean out your checking and savings accounts and you don’t have any protection. If someone steals your credit card, your loss is typically limited to only $50 and most times not even that.

If you pay attention to how your bank operates then you can eliminate having to pay bank fees.  You want the money to remain in your account and not pad the bank’s bottom line. Remember the adage from Sirach 20:12. “A man may make a good bargain, but pay for it seven times over.