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.

Health Care Sharing Plans – Part 1

Health care costs seem to be rising every year, which has increased the popularity of some alternatives to traditional health insurance. These are called health care sharing plans. They operate at a cost that is well below traditional health insurance but they may be restrictive with their benefits.

To help you decide if one of these plans is right for you and your family, you need to know that a health care sharing plan is typically a faith-based organization, which facilitates voluntary sharing among members for eligible medical expenses. 

Members send in monthly “shares” (which is similar to a premium) and that share covers the medical expenses of other members. In other words, I make a payment and that payment is distributed to you for health care costs you incurred, according to the program guidelines.

The premise is that people with similar beliefs and values are coming together to share each other’s burdens, which is similar to the risk-pooling nature of regular health insurance. It is the same message we find in Galatians 6:2, “Bear one another’s burdens, and so you will fulfill the law of Christ.”

A major appeal of health care sharing plans is that they are much less expensive than regular health insurance.  Families can become members in health care sharing plans for $300 to $500 per month, compared to about $1,500 per month, which is the average unsubsidized cost of traditional health insurance coverage for a family. 

The cost is usually calculated on one or two adults, and the plans we looked at have an additional cost for children. However, it is the same cost whether you have one child or ten. In addition, health care sharing plans usually have lower out-of-pocket expense limits than typical high-deductible health insurance. 

It’s easy to see the savings appeal for people who do not have job related health care or those who do not qualify for government assistance. 

One caveat to keep in mind is that healthcare sharing plans are not actually health insurance. One of the reasons they’re less expensive is that their coverage may be more limited. Their limitations of coverage are based not only on managing potential costs and claims, but also the faith-based nature of the programs in the first place.

While health care sharing plans do cover many ordinary medical expenses that health insurance covers, they typically do not cover many health-related costs deemed to be unbiblical. They may exclude payments for birth control, injuries related to alcohol or drugs, and injuries from certain hazardous activities (or even failure to wear helmets or seat belts in some situations.)

To become a member, health care sharing plans may require you to sign a statement of faith, and in some cases, they may verify regular church attendance and have your church membership validated by a church leader. The requirements vary by program, but are very similar.

Even though it may seem like a group of people pooling risk and sharing expenses is the definition of insurance, it isn’t. There are some key features of health insurance which health care sharing plans lack. Insurance is a legally binding contract between an insurer and the insured. But everything in the health care sharing plans is voluntary and not binding. Health care sharing plans do not guarantee compensation for specified loss, damage, illness, or death in return for payment of a premium.

Even though they are not health insurance they rely on a similar framework, but use different terminology. 

Here are some common health insurance terms, and their health sharing program equivalents:

  • Deductible = Personal Responsibility, Annual Household Portion (AHP), or Annual Unshared Amount (AUA)
  • Premium = monthly share
  • Claim = eligible event, incident, or illness
  • Explanation of Benefits (EoB) = Explanation of Sharing (EoS)

Health care sharing plans are designed to mimic insurance, and have successfully done so for decades to the tune of billions of dollars of facilitated sharing payments. 

In a time of rapidly increasing health insurance costs, people are turning to this alternative option more frequently. All of the major healthcare sharing groups have seen dramatic increases in membership over the last few years, with total membership now over one million people between the four major programs. 

You can find information on the web arguing how good or bad each of these programs are. In general, the website of each program is very clear about what is covered and is not—even if what they do and don’t cover isn’t always the same as traditional health insurance. And, of course, each program works differently from traditional insurance. 

And each of the healthcare sharing organizations has multiple options. And, to make it more complicated they all have their own unique approaches, pros, cons, and quirks. 

With an understanding of what these programs are, how they work, and some of the differences between healthcare sharing and regular health insurance, what should you do?

On one hand, there is considerable risk in joining these programs, as your health and even your life may be at stake. 

However, there are many people for whom these health care sharing options are working very well. Their needs are covered, and they are saving hundreds of dollars (or more) every month. 

But it’s a decision each individual needs to make based on their own situation, the price, moral appeal, and acceptance of the various coverage gaps and risks. And even being aware of the gaps, doesn’t mean it’s easy to know the risks. 

Being willing to accept those risks is a very personal decision that YOU have to make based on personal research. Nobody can make that decision for you.

The major health care sharing plans, are listed below. Most of them have an online calculator to determine your costs. There are “contact us” forms on their websites where you can request further information. And most of these sites have an online chat option. 

If you are considering a health care sharing program, we highly encourage you to do extensive homework. Look at the company, how long they have been in business, comments from members, all the different options and especially what they will and will not cover.

When making a decision such as this, which has such a potentially significant impact on your life and wellbeing, we also encourage you to pray for wisdom!

Join us next week for Healthcare Sharing Plans – Part 2. We will be having a discussion about things to beware of because they are not covered or coverage is limited.

Congratulations on Getting Engaged!

Christmas and Valentine’s Day are popular days for marriage proposals. If you recently got engaged, congratulations!

It’s time to start talking about a lot of things—the location of the wedding, the reception, the guests, the food, the flowers, and the all-important topic of money in your marriage.

It may not sound very romantic to talk about money when you still have stars in your eyes. But not talking about money before you get married is a sure recipe for disaster.

There are so many assumptions when couples go into marriage, and that is especially true about finances. Unless you have had significant discussions with your fiancé about your individual finances, you really don’t have any idea about how you’ll manage your joint finances.

Here are some examples of financial assumptions: He thinks $1,000 in debt is horrible. She thinks $10,000 in debt is normal. He wants to lease and get a new car every 2 years. She assumes they’ll buy a good used car and keep it forever. He thinks they will only use cash and buy what they can afford. She thinks that they can use credit cards and carry a balance from month to month. She thinks they need a formal budget. He would rather fly by the seat of his financial pants. She wants to keep their finances separate. He wants joint finances

It’s easy to understand how these things will come up sooner or later in a marriage, so it is best to have the money discussions when you are preparing for marriage.

The Compass Catholic book God Marriage & Money will help you with topics to discuss. There are 17 short chapters and each chapter contains a different topic related to money in marriage.

Sample discussion points include the following: 

  • Sharing credit reports and credit scores.
  • How much money can each of us spend without discussing it together?
  • How much debt do we have as a couple?
  • How much interest are we paying on debt each month?
  • How much do we have in savings?
  • What are our saving goals?
  • How much will we give?
  • Who will we go to when we need to seek Godly counsel? 

It is important to find ways for you both to be equally engaged in all money decisions or money can become a control mechanism and a divisive factor in your marriage. 

As a couple, define your decision making process around finances by creating “what if” scenarios. What if I lose my job? What happens when we have a baby on the way? What if we have to move to a different city?

We strongly believe that all the finances in a marriage should be joint. If you aren’t sharing your finances, what else are you holding back from your spouse? If there is a specific situation where the money cannot be co-mingled, decide together what is mine, yours and what is ours.

Most couples have their own hybrid system for what works best. Find the one that is best for both of you. Have a clearly defined money management system all the way from who handles the incoming mail to who handles the outgoing payments. Without a well thought-out operational plan, things fall through the cracks. One person “doing the accounting” is probably the best way to keep the books straight. But it is necessary for both of you to be involved and informed. 

When things get tough, address problems immediately (no secrets allowed).  Avoiding the issue only makes it more toxic and drives a wedge into your relationship. It may not sound romantic, but schedule regular money dates to make sure you are staying on track with your budget, savings, and financial goals.

Talk, talk and talk some more. The most important thing is to have open communication with no blame and shame. We all have hang-ups around money. Treat your partner with compassion. And it’s not just about communication. It’s about making a plan, and sticking to it together. 

Information gives you power over your finances. Not talking about your finances, not making a plan and not coordinating as a team makes you a victim of your finances. If you control your finances, they will never control you or your marriage. 

A lot of couples keep their parents involved in their finances, either by asking for loans or because mom and dad have been paying for some items and keep paying for them after the marriage.

Jesus said, “A man shall leave his father and mother and be joined to his wife, and the two shall become one flesh” (Matthew 19:5). When you marry, you are to leave your parents for your spouse in order to become financially and emotionally independent from your parents.

Part of the reason to leave is because it forces you to become more mature and more dependent on each other. That’s what marriage is all about – growing that bond between husband and wife

How you communicate about money and how you handle money as a couple has a huge impact on your marriage. Money can be one of the leading causes of divorce, so we encourage you to have the money talk when you are engaged and to find ways to work together on your joint finances.

Lessons from a Financial Train Wreck

An article on The WealthSimple.com website caught my eye. In their “Money Diaries,” they feature interesting people telling their financial life stories in their own words. 

This is the story of one couple who is a financial train wreck. They did just about everything wrong in their finances, and even acknowledge the mistakes they made, yet they refuse to change.

Their income is healthy by any standard. She makes $70,000, he makes $90,000 a year, additionally he earns $100- $250 per night a few times a week bartending at private events. Their total yearly salary is somewhere in the neighborhood of $170,000-$180.000. Yet they can’t make ends meet each month and they keep digging deeper and deeper into debt.

Spending whatever you earn without a thought to how you are spending it, or where it is going is a sure recipe for disaster.

The explanation for how they got into debt was, “I think education loans probably started us on this path. But credit cards got us in trouble.” Did you notice there was no acknowledgment of personal responsibility in those statements? No admission that THEY took out the student loans and THEY used the credit cards irresponsibly.

Not taking responsibility for financial problems also means they don’t have to take any responsibility for solving their problems. 

Sometimes you just have to look at yourself in the mirror and admit you were wrong and you need to do something to correct your mistakes. Facing up to mistakes is the only way to solve problems.

The wife has a law degree but has never practiced law. They think her student loan debt started at $90,000, but they aren’t sure of the current balance since the only time they check the student loan website is to request financial hardship status so they don’t have to make payments on the loan.

But the interest keeps building. With interest, the law school debt is now $120,000 to $140,000. That’s about $30,000-$50,000 or more they’ll pay in interest. 

They think they are escaping a problem by asking for deferrals on the loan, but all they are doing is pushing the problem into the future. The less they pay, the more interest adds on to the original loan amount, and the more they owe. That interest is building debt like a tsunami wave which will eventually crash down on them.

Like many people, this couple uses credit cards to sustain a lifestyle they can’t afford. They have a total of 10-15 credit cards, with 8 maxed out. Yet they freely accept more debt on the credit card and loan solicitations they get in the mail, even though they think the lenders are crazy for offering them more credit.

Maybe the banks just know a cash cow when they see one!

If you’re really serious about getting your finances straight, at some point you need to quit digging the hole deeper and deeper.

In addition to the student loan debt, they have no idea of their overall total debt. They think they have: $60,000 in credit card debt; $18,000 in a personal loan; $360,000 in a mortgage and a second mortgage, plus the unknown student loan amount. That’s close to $600,000 in debt!

The first way to control debt is to list it all. Every penny. Mortgage, car loans, credit cards, student loans, regular bills that are past due, and money borrowed from Uncle Fred. Then add up how much interest is charged each month. When people see how much money they waste every month by paying interest, it’s usually enough to get their attention and get serious about paying off debt. Yet they keep pushing it aside. 

They have 3 children who attend private school. The tuition is $32,000 a year per child or $96,000 total per year. But they declared a financial hardship and are only paying $15,000 total in tuition for the three children. But, of course, the $15,000 in school tuition is being charged to more credit cards. Another way they are digging the debt hole deeper and deeper.

They bought a house they couldn’t afford about 3 years ago. And they used both a first and second mortgage to buy the house. They have refinanced the first mortgage several times, which means more money down the drain in closing costs for refinancing. The house is worth $360,000, and that’s how much their mortgage debt is. If there is a need to sell, they will probably lose money.

They didn’t calculate the cost of the mortgage payment along with the other housing costs (repairs, maintenance, utilities, etc.) to ensure housing costs total no more that 40% of their monthly budget —mostly because they can’t even comprehend the thought of a budget.

Like many people in the same situation, they were looking for a quick fix. They cashed out his 401(k), which was around $70,000. They paid down the balances on three credit cards with the $70,000 and also paid off a $12,000 loan. Because there was some financial relief, they “Had a really good Christmas that year.”

But they didn’t fully understand the cost of the tax penalties in cashing in a 401K account, and they ended up owing $18,000 to the IRS and $2,000 to the state in penalties. Because cashing in the 401(k) didn’t work in eradicating their debt, they went to her parents and borrowed $40,000 to continue funding an unaffordable lifestyle.

If you want to escape from the trap of debt, there really isn’t a quick fix. Changing your financial life is like a diet. You can go on a starvation diet and lose lots of weight really fast. But you can’t keep it off. In a similar way, you can use easy money to pay off debt but if you have not changed your life style, debt is going to creep back up. 

In the article, it stated they shop at Goodwill for clothes because they can’t afford to pay full price, which is great. But when it came time to rent a tuxedo so their son could go to prom, they didn’t have enough cash to rent a tux, so they bought their son a tuxedo using their non-maxed out store credit card. They grow veggies in the back yard, but one of the kids likes to snack on sushi and a smoothie, which adds up to a $15-$20 snack!

The unfortunate thing is that they are not teaching their kids any financial responsibility. The kids are learning to be just as irresponsible with money as mom and dad are.

The really sad thing about this whole situation is the way they are destroying their marriage because they cannot handle their finances like responsible adults.

They closed the interview by admitting that one of them will probably have a heart attack and die from stress due to their financial situation. So, the solution is that the surviving spouse can use the life insurance proceeds to pay off debt. But that won’t solve anything if the surviving spouse continues to be irresponsible with money.

I don’t know if these people are Catholic, or Christian or if they even go to church. They never mention faith in the interview. 

The big piece they are missing is the joy of living as a steward of all the blessings God’s given them. That can change everything.

Stop Funding Your Adult Child’s Lifestyle

Your adult child comes to you for financial help. What’s your response? 

The adult child may be thinking: “They should help me—I deserve it. Mom and dad are fine financially, why shouldn’t they help me? I studied hard in school but I can’t find a job in my field. My roommates moved out and I can’t afford an apartment on my own.” 

Mom and dad may be thinking: “We need to save for retirement. We did our job to help them grow up. Now they are an adult and should be taking care of themselves. They waste money on unnecessary purchases why should we waste our money helping them do that?”

How much you should help adult children is a loaded question, and it’s two sided. Our children grow up and become adults, but we never stop being parents and often it’s hard to know where to draw the boundary between helping and hurting.

The best financial gift you can give your children is to teach them how to be financially independent when they are young. Giving them more and more financial responsibility as they grow from toddlers to teens to adults provides a solid foundation for being on their own.

If you’re a parent who wants your adult child to be financially independent, start when they’re young. Teach them to budget, because budgeting skills are key to long-term financial independence. It’s a learned skill, not something that they will pick up on their own. Start small so they can learn and gain confidence as they grow up and take on more responsibility. 

Even if you are paying for something when they’re teens, involve your child in budgeting. If you are paying for school clothes, give them an amount that can spend then allow them to spend it the way they choose. Or give them an amount they can spend on school lunches then let them manage the money. Don’t bail them out when they make mistakes. If they spend all their lunch money for the week on Monday, they’ll have to figure out how to eat lunch for the rest of the week without your help.

Teach them the difference between needs and wants. This goes along with budgeting, and learning the value of a dollar. Knowing the difference between needs and wants helps them map out a budget that takes care of the necessities before they blow money on something that is unnecessary

Define a transition plan. If your child will soon be leaving home, you may want to set up a deadline for financial independence, such as when they graduate from college and land their first job. Or you may want to implement a more gradual approach where you transition one financial obligation at a time. Whichever you decide to do it, have conversation to help them prepare for the transition. Your job is to be supportive but firm. Answer questions and give advice when asked but don’t bail them out if they miss a payment, incur a late fee or overdraft their bank account.

The transition plan needs to be clearly defined. There may be bills that make sense to pay jointly due to family plan discounts, such as a cell phone coverage. Or you may want to include the adult child in the family vacation without expecting them to contribute their fair share of the expenses. Or you may have saved money in a college fund that they can use for an advanced degree. Whatever it is that you are prepared to contribute to them, be sure to let them know.

This whole situation of how much to help adult children can be a very sticky subject between parents and children. It is important for both you and your spouse to be on the same page about what kind of financial assistance you may want to offer, how much and for how long. It can get even stickier when you consider there may be two married couples involved if your child has a spouse. The decision on how much to help is an art more than a science, which requires prayer and discernment. 

Supporting your adult children financially for too long, means you may fall into one of two traps. First, it drains money that you should be directing toward your retirement savings. Second, the more you help them, the more dependent they become.

There are many families who can support an adult child financially, but it is still a good idea to help them learn to handle their own finances. You may be in a solid financial situation today, but that can change.

There are ways to help them financially without providing financial support. Treat them to dinner when you visit. Give gifts of cash on special (or not so special) occasions so they can splurge a little (such as sending a check along with the Valentine’s Day card.) If you are visiting them, buy groceries and include a few extras things they enjoy but can’t afford.

Remember that a gift is a gift. If you are going to give a cash gift, they get to spend it the way they want to spend it. If you have strings attached, then it really is not a gift. If you are helping them financially it is important to distinguish between a gift and something that has strings attached. Many hard feelings on both sides can be avoided by being sure this is understood clearly by both parties.

If an adult child runs into financial problems that are no fault of their own, how much should you help? There are a lot of factors to consider to answer that question. How much can the parents afford? Is the child going to work and contribute to the household expenses? Are they married and are grandchildren involved? Is the problem able to be solved relatively quickly?

I believe that we should do whatever we can to help our children when something challenging happens to them that is beyond their control. You just have to walk the fine line between spoiling them and helping them. Provide just enough to help them stay out of debt for basic needs

If your adult child is married, do not usurp the role of their spouse. Your advice is secondary to their spouse. Don’t use your money to control their lives. Encourage them to be dependent on God and each other.

Teaching children to handle money God’s way AS THEY GROW UP is part of a parent’s responsibility. If you really want what is best for your children, and if you want them to remember you as a good parent, keep in mind this verse from Proverbs 22:6 “Train up a child in the way he should go; even when he is old he will not depart from it.”

Are Christmas Bills Flooding Your Mailbox?

The buying spree on Black Friday after Thanksgiving may have led you to experience Black Monday, Black Tuesday, Black Wednesday … as you pick up all those Christmas credit card bills from the mailbox each day.

For many people, the reality of Christmas bills arriving in the mail means the worst time of the financial year. Not budgeting for Christmas spending, but going on a spending spree anyway means the cost for all the gifts, decorations, travel and party food has hit the fan and it’s time to figure out how to pay for the Christmas spending.

Reviewing various websites, the average cost of Christmas is about $700 per family. Most of the money is spent on gifts and after that, the next largest Christmas expense is travel. 

Statistics show that the average family will be paying for Christmas 2018 – all the way until October 2019. And that’s about the same time the whole buying spree starts all over again!

If you are in a debt cycle now that the Christmas bills are rolling in, stop spending with your credit cards until you can get the Christmas charges paid off. Put your credit cards in a drawer and don’t use them again until your Christmas debt is paid in full. 

Or put the cards in a baggie, seal it up nice and tight, then put the baggie in a bowl, add water to the bowl and put the whole thing in the freezer. That will make the credit cards much harder to access and you’ll have to stop and think before using them.

While your credit cards spending is on hold, scour each and every spending category for ways to cut back. The only response to spending money at this time is NO! so you can direct every extra penny to pay off the Christmas debt.

Add up all of the Christmas purchases on each of your credit cards so you know the total you spent on Christmas by card. Then for each card make the minimum payment, plus as much as you can scrape up to pay against your Christmas purchases. 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.

Luke 14:28-30 reads: “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.’”

Not planning for Christmas spending is like starting to build something with no idea of the total cost. You know Christmas comes every year on December 25th. You know that there is extra spending at that time of year. You know you have to spend money on gifts, decorations, travel and food. But just like the verses from the Gospel of Luke, if you haven’t planned your spending, you are the person who started building without calculating the total cost.

Make this be the LAST year that you get into debt for Christmas. Plan ahead for Christmas 2019!!

As soon as you have the Christmas debt from 2018 paid in full, figure out how many months are left until Christmas 2019. Multiple the number of months remaining by the amount you can afford to save for Christmas. And that calculation is how much you can spend on Christmas in 2019 so you can have a debt free holiday. The key is to limit your spending for Christmas 2019 to the amount of money you have saved!

This is the year where you get ahead of the debt cycle by paying off the Christmas debt and saving for the upcoming Christmas so it is important to control your spending and escape the ongoing debt.

If you were only able to save $400, that’s all you can spend. You can only spend what you have saved. Which is just the basic idea behind making and managing a budget.

Even ants know how to save! Proverbs 6:6-8 says: “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.” You are smarter than an ant, but, do you have the discipline to save like the ants do? 

Always remember—in the back of your mind—Christmas will be coming again on December 25th. Will you be ready celebrate Christmas this year without going into debt?

As Sirach tells us in 18:30, “Do not follow your base desires, but restrain your appetites.” Restraining your appetites means a healthy financial future. What’s more important—over the top Christmas spending or a secure financial future?

Make 2018 be the last year you go into debt for Christmas!

What is Socially Responsible Investing?

Biblically Responsible Investing (BRI) or Socially Responsible Investing, (SRI) is gaining in popularity around the US.  BRI is an attempt by investors to align their investment decisions with their personal belief system and convictions.

You know there is nothing in the Bible that gives you specific investment advice or tells you which stocks to buy in the stock market. But there are a lot of verses in the Bible about loving our neighbor, caring for the poor, and using everything in our life to honor God in all we say and do. And that “do” part includes how and in what we invest the money God has entrusted to us.

A socially responsible investor considers the nature of the business the company conducts as an investment criterion. This may include avoiding investments in companies that produce or sell addictive substances (like alcohol, gambling, and tobacco.) The investor may also seek out companies engaged in social justice, environmental sustainability and alternative energy/clean technology efforts, as well as investments that support religious beliefs.

The policies of some investment companies have been avoiding businesses that deal in alcohol, gambling and tobacco products since the 1940’s!

There are several formal organizations that advocate SRI. One is the Interfaith Center of Corporate Responsibility (ICCR), which is considered the foundation of the movement. It started in the 1960’s in response to companies making money from tobacco, tainted infant formula being sold to mothers in the developing world, and agent orange.

Paragraph 1926 of the Catechism of the Catholic Church tells us “The dignity of the human person requires the pursuit of the common good. Everyone should be concerned to create and support institutions that improve the conditions of human life.”

The United States Conference of Catholic Bishops (USCCB) has been active in SRI since 2003 when they issued a list of principles that they follow regarding Church investments.

The main points of these principles are:

Principle 1: The Conference should exercise responsible financial stewardship over its economic resources obtaining a reasonable rate of return on its investments.

Principle 2: The Conference should exercise ethical and social stewardship in its investment policy.

Their investment strategy is based on Catholic moral principles which support the virtues of prudence and justice.

The primary strategy of the USCCB is a refusal to invest in companies whose products and/or policies are counter to the values of Catholic moral teaching. Rather, they focus on investing in companies which promote the common good. The investments they choose either produce some significant social good or promote the Church’s service to the poor.

The USCCB reports no negative impact on the financial return of the Conference’s investments since these Socially Responsible Investment Guidelines have been in place.

You may be thinking that this type of investment strategy is great for the church but not applicable to you. But stop for a minute and think of all the issues that are considered “hot buttons” today, such as: pro-life; climate change; human trafficking; handguns; and addictive substances.

Are your investments supporting those issues which align with your faith?

We must be aware of how our investments support businesses that honor God. Money talks and the more we make our investments align with our faith, the louder our money talks.

As a nation full of investors, we can make a difference if we just take the time to do it. If the laity can keep the issues alive we can have more effect than politics ever will.

There are many faith-based investment companies that screen businesses for these issues such as “sin stocks” (tobacco, alcohol, abortion, etc.)

We can use our position as stockholders to help change the policies of various businesses. You can have an effect on the way companies run their organizations.

Baby boomers see the world differently than their parents did. Millennials see the world differently than the boomers. The younger the investor, the more aware they are of the companies they are investing in.

If you want to make a difference, carefully choose the company that you use for investment advice. Most investment advisors and financial planners are only focused on the return and not what the company is doing to get that return.

If you carefully choose your investment company you will be able to help make a difference. Don’t believe the story from 20 years ago that you will not earn as much on your investment if you focus on SRI. Business schools have provided strong evidence that companies operating with sustainability metrics can actually do better than their peers.

That doesn’t mean everyone will agree with you. Even within religious communities, it’s sometimes hard to convince everyone that you can do well while you are also doing good.

Paragraph 1916 of the Catechism tells us, “As with any ethical obligation, the participation of all in realizing the common good calls for a continually renewed conversion of the social partners.”

Our Gospel commitment to Christ’s Kingdom of love, justice, and mercy always includes advocating and supporting fairness for all. God calls us to form a community and to correct both the symptoms and causes of injustice that rip apart the solidarity of a community.  (US Catechism for Adults)

Through SRI we can have an impact in solving the social justice issues of our modern culture.

How Much Debt is Too Much?

Debt is a way of life in America. Most Americans carry some amount of debt. There is the mortgage, the car payment, medical bills, credit cards, student loans and the money good old Uncle Fred loaned to you.

Unfortunately, many people don’t realize they have too much debt until they reach disaster level with their debt load. That’s when they get to the point where they’ll do anything to escape the enormous weight of those monthly payments.

If you don’t know how much debt you have in total, try adding up the outstanding balances on all your debt and see if the number horrifies you. Calculate how many hours you have to work to pay your monthly debt. Calculate how your total debt compares to your yearly salary. How many years do you have to work to pay it off? Calculate how much you are paying each month in interest only. Then figure out what you are NOT able to do because you have to pay debt.

Usually that’s enough for an epiphany of some kind, and there is a “light bulb” moment when you decide it’s time to turn things around. That happened to us when we hit bottom. We had a mortgage, tons of credit card debt, two car payments, no savings and an unhappy marriage filled with financial stress. We knew that something had to change, in order for us to turn around our financial mess and stay married.

If you have stopped bringing the mail into the house and let it sit in the mailbox, or if you bring it into the house and shove it into a drawer so it is easier to ignore, you may be in a situation where the debt is taking over your life.

If your credit card balance increases every month you have too much debt.

If you are just squeaking by financially each month, and living paycheck to paycheck that is a big warning sign. When your debt payments consume so much of your income that you’re scraping pennies together at the end of the month, it’s time to do something about it. 

If you’re just making the minimum monthly payments, getting out of debt can take almost forever. When you owe so much that your credit cards are rejected it is a telltale sign that things have gone too far.

Have you ever checked your net worth? If you haven’t, it’s worth exploring.  First list your assets and total them (house, car, cash on hand, bank and investment balances) then list your debts and total them (outstanding balances on your mortgage, car loans, student loans, credit cards, past due bills, etc.) Then subtract your debts from your assets. That figure is your net worth. If your net worth is a negative number then you owe more than you have. When your net worth calculation is negative, it is certainly a signal that things have to change. (Go to CompassCathlic.org where you can find “spreadsheets to customize your budget” for a form to help you calculate your net worth.)

If you aren’t able to save for an emergency fund, or if you aren’t contributing to long term savings through a 401K or IRA because all the money is going to pay off debt, you are making one serious mistake. A mountain of debt can create a vicious cycle of not saving and not saving means more debt when emergencies come up.

A job loss, unexpected illness, or family emergency will throw your finances into a tailspin. Think about what would happen if you or your spouse lost your job—how long could you survive financially? How many months of living expenses and debt payments can you handle with a decreased income?

If you’re in debt and ready to make a change, you have to be ready to say enough is enough. You have to get to the point where you’re thoroughly tired of the struggle, and ready to make some sacrifices—to do whatever it takes to turn it around.

The first step in getting out of debt is to acknowledge the situation you are in, then vow it’s time to change. Start by praying for strength and guidance as well as contentment. Track every penny you spend, which will show you how much money you may be wasting on non-essentials. If you can’t pay off your credit cards every month, stop using them.

Starting with your credit cards, make the minimum payment on all your debts and funnel any extra cash to the credit card with the smallest balance, while making the minimum payment on all other debts. Once the credit cards are paid off, tackle the consumer loans, school loans then the mortgage.

We know what you are going through. When all of your expendable income goes toward debt payments, it can be disheartening. We’ve been there and it is not a happy place to be. Paying off debt is not fun and it is a ton of hard work. But, I can tell you from experience, that there is nothing better than paying off all your debt and being totally debt free.

If debt is holding you back, now is your moment to decide to stop digging a hole, and start climbing out. Getting out of debt won’t happen overnight, but the process can’t begin until you decide it’s time. Dealing with and recovering from your mountain of debt requires a life change, a total transformation.

When you and your spouse decide together that enough is enough, and you work together to pay off your combined debt, your marriage will be MUCH stronger.

Proverbs 22:7 tells us “Just as the rich rule the poor, the borrower is slave to the lender.”  Stop being a slave and get that debt paid off! The freedom is worth the struggle.

Easter

We are all familiar with the story of the Easter resurrection.

He is not here, for he has been raised just as he said. Come and see the place where he lay.  Then go quickly and tell his disciples, ‘He has been raised from the dead, and he is going before you to Galilee; there you will see him.’ Behold, I have told you.” Then they went away quickly from the tomb, fearful yet overjoyed, and ran to announce this to his disciples.  Matthew 8:6-9

Mary Magdalene brought the shocking news to the apostles that the grave was empty and the Lord had risen.  When Mary Magdalene and the other women heard the news from the angel “. . .  they went away fearful yet overjoyed … ” only to be met with skepticism and disbelief from the apostles when telling them about the angel and the empty tomb.

Can you imagine what the apostles were thinking after Mary’s amazing news? Their heads must have been whirling with so many thoughts. “What just happened? Is this the truth? How does my life change based on knowing he is risen? What do I do now?”

Jesus appeared to two disciples on the road to Emmaus and they only recognized him in the breaking of the bread, and their hearts were burning for joy (Luke 24:32).  Similarly, in chapter 21 of John’s Gospel (John 21:1-14), we hear that Simon Peter and others had returned to the Sea of Tiberius in Galilee and taken up their former lives as fisherman. When they met Jesus on the shore, they recognized him in the breaking of the bread.

The various feelings expressed in each of the Easter stories above—from fear to joy to skepticism to disbelief to recognizing Jesus in the breaking of the bread—can also be part of our faith journey.

Sometimes we fear what God wants us to do, and how much he is asking of us. We often find great joy in our belief.  Skepticism can occur when someone challenges us about what we believe and disbelief can haunt us at those times when our faith is not strong.  At other items we are overwhelmed by the miracle that occurs at each Mass in the breaking of the bread.

In each Mass, we have the opportunity to share the disciples’ experience of meeting the resurrected Christ and recognizing him in the miracle of the Eucharist. The words of the Memorial Acclamation express the disciples’ experience of the resurrection. When the priest says: “Let us proclaim the mystery of faith,” our response proclaims these great tenants of our faith:

A – “Christ has died, Christ is risen, Christ will come again.”

or

B – “Dying you destroyed our death, rising you restored our life. Lord Jesus, come in glory.”

or

C – “When we eat this bread and drink this cup, we proclaim your death, Lord Jesus, until you come in glory.”

or

D – “Lord, by your cross and resurrection, you have set us free. You are the Savior of the World.”

 

Through the Eucharist, we are all invited to be transformed and conformed to the Image of God. We have to be willing to be crushed – dying to ourself and giving ourself to others.  This means we must be willing to sacrifice and suffer for the good of others.

Just as the bread and wine are transformed into the body and blood of Christ, so too are we transformed if we have placed a part of ourselves, (family, job, finances, worries and gratitude) in place of the bread and wine that are being transformed.

The Eucharist enables us to be part of the body of Christ, it allows us to be transformed and to be nourished by God so that we, in turn, can nourish those in need.  By participating in the Eucharist, we commit ourselves to sacrifice for others just like Jesus did.

Assembling to celebrate Eucharist allows God to transform the bread and wine and us into the Body of Christ.  By assembling, we acknowledge the truth of nourishing the hungry and thirsty, caring for the sick and imprisoned and all those in need.

Through the Eucharist we can mystically enter into the Death and Resurrection of Jesus, enabling us to accept His saving grace in the life long process we call Salvation. Jesus’ body and blood are present in the bread and the wine that are consecrated during the Liturgy of the Eucharist. Jesus is present in the Christian community gathered to celebrate the Lord’s Supper.  He is present in the priest, in the proclamation of the Word, and in everyone assembled for the celebration of the Mass.

Transformation should occur at each Mass we attend. The next time you respond when the priest asks us to “proclaim the mystery of faith,” ask yourself the same question the apostles may have asked themselves: “What just happened? Is this the truth? How does my life change based on knowing he is risen? What do I do now?”

The eleven disciples went to Galilee, to the mountain to which Jesus had ordered them. When they saw him, they worshiped, but they doubted. Then Jesus approached and said to them, “All power in heaven and on earth has been given to me. Go, therefore, and make disciples of all nations, baptizing them in the name of the Father, and of the Son, and of the holy Spirit, teaching them to observe all that I have commanded you. And behold, I am with you always, until the end of the age.” Matthew 8:16-20

Just like the apostles, Jesus us calling each one of us to “make disciples of all nations” through the saving grace of his life, death and resurrection.

Planning for Retirement: Part II

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In my last post, I touched on some basic retirement planning concepts. A brief analysis of your assets, contributions to retirement savings, expected retirement expenses, and goals is a good place to start your analysis and get a snapshot of your progress.

One area many people overlook is how their expenses may change in retirement. Ideally all credit cards, consumer debt and the mortgage will be paid off so only a minimum amount should be needed to sustain your lifestyle. However, other expenses may crop up or get higher and those should be factored into your planning as well.

Leading into the Golden Years of Retirement, many people are still active and mobile. In fact, retirement probably conjures up images of endless rounds of golf and travel to exotic places as well as having the time to volunteer at some of our favorite charities. But, as we get older, we need to be mindful of our health and the expenses related to making sure we are taking care of ourselves properly.

Also, in the event that we need to take things a little easier, it may become necessary to hire someone to help with various tasks around the house. Even if it is employing a nice teenage boy from the neighborhood to mow the lawn, you will want to compensate him for his time and effort.

Along the same lines, having meals prepared for you may be an added expense that needs to be factored into the budget. Whether it means going out to restaurants more often or having a service that delivers meals to your home, if your capacity to cook for yourself is compromised, you need to consider this extra expense.

Similarly, housekeeping services may need to be in place. Granted, some people may just want those services in place because they’ve always done it themselves and would like a break from it, but others will legitimately need the help due to physical limitations. Either way, if it is a service that has not been utilized in the past, it is important to do some research to make sure there are funds available for it.

One area I know will impact us personally is home repairs, and I need to do some research. I have been incredibly blessed by my husband’s talents and abilities to take care of our home. He does pretty much all of our home repairs himself with the exception of some of the really big jobs like the air conditioning (which is one reason why we have a home warranty in place). So, my assignment is to find out how much some of these repairs would cost if we need to hire someone to do them, then I need to make sure that I account for that when I’m considering our retirement plans.

Not only does my husband do the majority of our home repairs, but he also does some of the basic maintenance on our cars such as oil changes and brake jobs. We have a reliable mechanic whom we trust with the larger maintenance issues that crop up so he would likely be our go-to person for the oil changes and brake jobs, too. However, we will need to factor in paying for his time, not just paying for the parts like we do now. (Of course, if I had things my way, I wouldn’t even own a car, I’d just call a cab to take me places!)

I hope this list has helped you walk through your own expenses and take a look at how things might change for you in retirement. Your list may look very similar to this or it might be entirely different. The important thing is to make sure you put thought into this area because it is just as much a part of the retirement planning process as the amount you have saved and your retirement age.

“Help carry one another’s burdens and in this way you will obey the law of Christ.”—Galatians 6:2